Car News

Ford Plant Shuts Down While “Chip Shortage” Sweeps the World

The global chip shortage puts serious pressure on automakers, adding new obstacles to the recovery of the auto industry from the crisis of the epidemic. On Monday, American automaker Ford said that due to chip shortages and weak demand, Ford’s plant in Saarlouis, Germany would suspend production from now until February 19. Affected by the epidemic, a large number of automotive chips have flowed into the hands of electronic equipment manufacturers. However, the recovery of the automotive industry has been unexpectedly fast and new energy vehicles are even more eager for chips.

When can this “chip shortage” crisis be ended?

It was reported that there were about 5,000 workers in this factory, responsible for the production of Ford’s most popular model in Europe, the Focus. Last week, also due to a shortage of chips, Ford announced the temporary closure of its SUV plant in Kentucky, USA. In addition, due to the interruption of the supply of key parts, Ford’s Maraimalai Nagar plant near Chennai, India, also announced that it would extend the workers’ Pongal holiday by one week.

The direct consequence of the factory shutdown was the decrease in car sales. According to industry insiders in India, the semiconductor shortage and the resulting impact would reduce Ford’s output and exports in the local market by 50%. In December of last year, Ford produced nearly 7,000 cars in India and its cumulative production from April to December was less than 65,000.

As production in Asia and North America has been suspended, Germany has also been involved. Would other European factories be affected? Ford said it did not expect similar actions at other Ford European plants. However, according to CNN, Ford’s closure of its German factory indicated that the shortage of chips might worsen.

A reporter from Beijing Business Daily contacted Ford for an interview, but no response was received as of press time.

In fact, in addition to Ford, the German Volkswagen Group, the Italian-American automaker Fiat Chrysler, Japan’s Toyota, Nissan and Honda also face chip shortages.

“The main reason for the lack of chips is insufficient production capacity. The production of high-end chips is concentrated on TSMC. TSMC’s orders are already hot but it is still helpless for many manufacturers.” Zhang Xiaorong, Dean of Deepin Technology Research Institute, told Beijing Business Daily.

As the epidemic hit, on the one hand, countries have formulated blockade and travel restriction policies in response to the public health crisis, so car sales have been greatly affected. On the other hand, consumers at home were rushing to buy more mobile phones, game consoles, smart TVs and laptops. The result was that semiconductor manufacturers redistributed their production capacity and leaned toward manufacturers of best-selling technology equipment such as smartphones and game consoles.

According to reports, the current chip shortage is mainly divided into two types, one is the MCU (micro control unit) used in ESP (Electronic Stability Control System). ESP is a part of the car’s active safety system, which can prevent sideslip, and is generally equipped with mid-to-high-end models. The other is the MCU in the ECU (Electronic Control Unit). ECU is widely used in various control systems of automobiles and is called “driving computer”.

The China Automobile Association said that Europe and Southeast Asia were affected by the epidemic and major chip suppliers have reduced production capacity or shut down factories. This has further exacerbated the imbalance of chip supply and demand, leading to the risk of chip shortages or even cut-offs in some downstream companies. The recovery of China’s auto market has exceeded expectations, which has further promoted the growth of chip demand.

In addition, driven by the development of 5G technology, the demand for chips in the consumer electronics field was increasing rapidly and chip production capacity has encountered challenges, which has seized the production capacity of some automotive chips. Zhang Xiaorong also pointed out that even in normal times, chip manufacturers receive more orders from the above-mentioned industries than the automotive industry. Therefore, it is difficult for chip manufacturers to balance demand for the time being while the business of car manufacturers has become abnormally active recently.

When will the car’s chip shortage be resolved? According to IHS Markit, the semiconductor shortage may continue throughout the first half of the year.

“At present, TSMC and Samsung have insufficient input and output on such chips, so it will take a certain time for production capacity to go back to normal. It is estimated that it will directly affect until around June.” Xuan Jiyou, director of investment research of Qianmen Assets, believed that the global Major factories are experiencing production shortages and the demand for chips for new energy vehicles is several times that of traditional fuel vehicles, so the impact should continue for some time.

The domino effect caused by the tight supply of chips is intensifying in the semiconductor industry chain. At present, more than 20 chip companies have issued notices for price increases, which include memory chips, power management chips and automotive chips. According to statistics, each car will be equipped with dozens of chips before 2022 and the total value of the chips built in the car will reach $600.

The setback in car sales caused by the shortage of chips is already a certainty. According to the forecast of the US Bernstein Research Company, global car sales will fall by 15% in 2020 and increase by 9% in 2021.

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