[Car Story] The Automotive Industry Once Again Hindered by Semiconductors

Global Vehicle Production Expected to Decrease by 6% This Year Due to Automotive Semiconductor Supply Shortage

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[Asia Economy Reporter Changhwan Lee] The global automotive industry is struggling due to a shortage of vehicle semiconductors. The supply shortage of vehicle semiconductors, which had once shown signs of improvement, has recently worsened again due to the spread of COVID-19, significantly reducing global automobile production.

According to foreign media and the Korea Automobile Manufacturers Association on the 20th, the shortage of vehicle semiconductors is expected to reduce the production volume of Japan's six major automakers by more than 1 million units compared to previous estimates this year.

Toyota forecasted its automobile production for this fiscal year to decrease by 3% from the previous year to 9 million units. Nissan announced plans to cut production by 250,000 units, and Honda also expects sales to decrease by 150,000 units.

Suzuki is expected to suffer the biggest blow, with production projected to decrease by 350,000 units, about 10% compared to the previous year. This is because Suzuki’s main production site in India is expected to see production drop to about 40% this month.

In addition, local reports suggest that the combined production cuts of six companies, including Mazda, Mitsubishi, and Subaru, could reach up to 1.05 million units.

The biggest cause of the production decline is the shortage of vehicle semiconductors. Among these, the recent significant spread of COVID-19 in Southeast Asia has severely impacted local semiconductor factories, which has had the greatest effect.

Toyota cited the closure of STMicroelectronics’ factory in Malaysia as the main reason for the production cuts. Due to the worsening COVID-19 situation, employees have been unable to come to work, making semiconductor supply difficult. As a result, not only vehicle parts such as brakes but also finished products cannot be produced.

STMicroelectronics has stated that orders are backed up by 18 months and that factory operations are slower than expected, making it impossible to meet demand. Infineon also halted operations at its Malacca factory in Malaysia for a total of 20 days over five weeks starting in June, indicating a similar situation.

Malaysia hosts production bases for major vehicle semiconductor companies such as Infineon and STMicroelectronics. It is the largest vehicle semiconductor production base in Southeast Asia, with a total of 25 semiconductor suppliers gathered there.

GM, Hyundai, and Other Global Automakers Also Facing Worsening Conditions

Other global automakers are also facing difficulties. U.S. General Motors (GM) temporarily suspended production lines at six North American plants, including Fort Wayne, Indiana, and Wentzville, Missouri. As a result, GM Korea has reduced production by 50% at its Bupyeong Plant 1 and Plant 2 in Incheon starting this month.

Hyundai Motor Group also temporarily halted operations at its Asan plant in Chungnam, which produces the Grandeur and Sonata, and Kia’s plant in Georgia, USA, stopped production for one day on the 7th.

The damage to the automotive industry has snowballed. A U.S. research firm predicts that global automobile production this year will fall to 80 million units, about 6% lower than initially expected. The total revenue loss is estimated to exceed $130 billion, and if production cuts of the scale seen at Toyota continue, the situation is expected to become even more severe.