Has the worst of the semiconductor shortage passed? GM says "We will achieve this year's target performance"

[Asia Economy Reporter Yujin Cho] General Motors (GM) of the United States announced that the semiconductor shortage crisis, which has hit the entire industry, has begun to improve and that it expects to achieve its performance targets for this year.

Paul Jacobson, GM Chief Financial Officer (CFO), said on the 24th (local time), "The semiconductor supply shortage situation seems to have passed the worst phase," and "We are confident that we can achieve the performance targets we set." He added, "We are working to resolve the (semiconductor chip supply shortage) issue, and it is expected to return to normal around the second half of this year."

GM presented its annual pre-tax profit forecast for this year at $10 billion to $11 billion (approximately 11 trillion to 12 trillion KRW), with earnings per share of $4.50 to $5.25 earlier this month.

This figure reflects the expected damage amount of $1.5 billion to $2 billion due to the shortage of automotive semiconductors, but the market has continued to express pessimistic views that the target is unattainable given the current semiconductor supply and demand situation.

The ripple effects of the semiconductor supply disruption have expanded across the global automobile manufacturing industry, including GM. GM has shut down automobile and crossover plants in Kansas, Canada, and Mexico, while Volkswagen, Ford, Subaru, Toyota, Nissan, Stellantis, and others have also decided to reduce production one after another.

According to market research firm IHS, global automobile production is expected to decrease by about 1 million units in the first quarter of this year alone due to semiconductor supply disruptions. Consulting firm AlixPartners predicted that the resulting revenue loss in the automobile industry will reach $61 billion this year.

There are also forecasts that the semiconductor supply disruption will extend beyond this year into next year. Due to a power outage caused by an abnormal cold wave in Texas, major automotive semiconductor specialists such as NXP and Infineon stopped their production lines, leading to expectations that the global automotive semiconductor supply situation will worsen further.

Market research firm Lopez Research stated, "With the prolonged COVID-19 pandemic, semiconductor demand is expected to continue increasing, and the semiconductor supply shortage will persist at least until the end of this year and possibly into next year depending on the extent of companies' production capacity expansion."

The impact of the semiconductor chip shortage on the automobile industry became clearly visible last month. The cause was the overlapping of massive purchasing demand for IT-related products, which benefited from prolonged lockdown measures and the spread of remote work due to COVID-19.

Additionally, most automobile manufacturers, fearing a consumption slump at the beginning of the COVID-19 crisis, reduced parts orders to keep parts inventory low, which exacerbated the production disruption situation.

Automotive semiconductors are applied to various in-vehicle components such as clusters, AVN (audio, video, navigation), and head-up displays (HUD), and typically, hundreds of automotive semiconductors are installed in one vehicle.