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July 3, 2022
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Semiconductor Shortage Disrupts Electric Car Production

According to a report by the “Nihon Keizai Shimbun” on January 9th, semiconductors essential for automobile production are facing a growing shortage of supply. Semiconductors are indispensable components in the process of electrification of automobiles. However, to meet the large demand for semiconductors in the smartphone industry, the semiconductor production industry has no stock transferred to the automotive industry. Following Volkswagen in Germany and Honda in Japan, Nissan also decided to reduce production. Toyota Motor Corporation is also unable to determine the production plan for 2021. It is fair to say that the impact of insufficient semiconductor supply has spread to the world.

Volkswagen Group has announced that it would adjust its production in China, North America and Europe on the grounds of insufficient semiconductor supply. In Germany, the main model “Golf” would be discontinued from December 2020 to mid-January 2021. SEAT, a subsidiary of Volkswagen Group, would cut its production in Spain from late January to April. Honda has also decided to adjust its production plan: the production of small cars produced by Suzuka would be reduced by approximately 4,000 in January.

The main reason for the reduced production of car companies was the delay in supply of semiconductor-attached parts by German Bosch and Continental Group and other parts manufacturing giants. These semiconductors are purchased from NXP Semiconductors in the Netherlands and ST Microelectronics in Switzerland, but it seems that some semiconductors have been delayed in supply.

With the popularization of pure electric vehicles and autonomous driving technologies, the importance of on-board semiconductors has further increased. According to KPMG Japan, the average number of semiconductors used in each pure electric vehicle is twice that of a gasoline vehicle. At present, due to the sharp increase in demand after the covid-19 pandemic, automakers need a large amount of semiconductors. However, due to the demands of household life, semiconductor purchases for computers and smart phones are also increasing. The semiconductor industry has received a large number of orders of different specifications in multiple industries, which seems to be beyond their production capacity.

One of the main reasons for the sluggish semiconductor supply was believed to be that the semiconductor industry is advancing the so-called “horizontal division of labor”, that is, separating R&D from production. Semiconductor companies often do not produce by themselves, but place orders from semiconductor foundry manufacturers. In order to produce a variety of semiconductors, it will take a certain amount of time to adjust equipment, etc. So it is difficult for foundries to manufacture different semiconductors at the same time. For some car companies to get the normal supply of semiconductors, it may take half a year.

The report pointed out that most car production was stopped in the first half of 2020 due to the pandemic. Moreover, the automotive industry cannot compete with high-tech industries such as smart phones and mobile base stations that have expanded their business during this period. Semiconductors, which are becoming increasingly important in automotive upgrades, are facing a production bottleneck, which can be a new issue encountered by the industry.

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