The much publicized semiconductor shortage has now extended to Asian automakers.
Following Hyundai Motor’s Ulsan Plant 3 and 5, Kia Soha Plant 2 has also decided to suspend operation, according to a report in LiveMint.com.
As the factory was shut down, the possibility of delaying the delivery of vehicles such as Tucson, Avante, and Stony has greatly increased, sources said.
On May 14, Kia will suspend operation of Soha Plant 2 from May 17 to 18 due to the supply-demand shortage of semiconductors such as the airbag control unit (ACU). Soha Plant 2 produces small sports utility vehicles (SUVs) and Stonics.
Soha Plant 2 wasn’t the only one to shut down.
Hyundai Motor Company has decided to close line 52 at Ulsan Plant 5, which produces the semi-mid-sized SUV Tucson and the hydrogen electric vehicles Nexo.
On May 18, the operation of the third factory in Ulsan, which produces the semi-mid-sized sedan Avante and small SUV venues, will be suspended.
Previously, Ulsan Plant 4 producing Porters, Ulsan Plant 1 producing Ioniq 5, and Asan Plant producing Grandeur and Sonata, were also closed.
When the shipment schedule was delayed due to the prolonged supply and demand of semiconductors for vehicles, Hyundai Motor Company sent an apology by mail in the name of the vice president of the domestic business division, Wonha Yoo, to customers waiting for shipment.
“The main reason for the delay in delivery of vehicles is the shortage of supply of main conductors for vehicles,” said Yoo, in an apology, “Hyundai Motor will find alternative suppliers for semiconductor sourcing and deliver vehicles as soon as possible by streamlining production operations.”
The ongoing semiconductor shortage will cost the global automotive industry US$110 billion in lost revenues this year, AlixPartners estimates, up more than 80% from the consultancy’s late-January estimate of US$61 billion.
Production of 3.9 million vehicles will be lost in 2021 as a result of the shortage, AlixPartners forecasts.
“The pandemic-induced chip crisis has been exacerbated by events that are normally just bumps in the road for the auto industry, such as a fire in a key chip-making fabrication plant, severe weather in Texas and a drought in Taiwan,” Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners, says in a news release.
“But all these things are now major issues for the industry – which, in turn, has driven home the need to build supply-chain resiliency for the long term.”
Adds Dan Hearsch, a managing director in AlixPartners’ automotive and industrial practice: “There are up to 1,400 chips in a typical vehicle today, and that number is only going to increase as the industry continues its march toward electric vehicles, ever-more connected vehicles and, eventually, autonomous vehicles. So, this really is a critical issue for the industry.”
Ford alone anticipates losing 1.1 million units of planned production this year because of the shortage, including a cutback of up to 50% in the second quarter, CEO Jim Farley said in late April during a conference call with financial analysts.
The impact on production will continue to be felt well into second-half 2021 and could extend into 2022, he said.
To make matters worse, German semiconductor supplier Infineon, warned that its inventories are depleted, downstream facilities responsible for final assembly are waiting on shipments of raw chips and its factory in Austin would need four months to fully recover from February’s storm-related power outages in Texas.
And that’s the good news.
“Everyone is jostling to get more of them, whether it is for personal computers, mobile phones, automobiles, or what have you,” Infineon chief executive Reinhard Ploss told reporters last week.
“We’re fighting for every wafer.”
With an estimated 2.5 million fewer cars built worldwide in the first half of 2021, Ploss said he believes automakers are waking up to the fact that part of the problem was due to their vaunted “just in time” system of lean manufacturing.
This relies on the delivery of parts to the factory line for direct assembly in vehicles rather than draining precious cash reserves with the warehousing of spare parts.
Sources: LiveMint.com, WardsAuto.com, Ford Motor Co., Alix Partners, Fortune.com