The global semiconductor shortage has finally started to bite at Toyota, highlighting how a resurgence in Covid-19 infections from the Delta variant is now stifling chip manufacturing in Southeast Asia, worsening a parts crisis for car companies.
Japan’s largest car maker said Thursday it was cutting production in the country by 40% because of a shortage of semiconductors, highlighting how the scarcity is hitting even the best-prepared companies. In North America, Toyota is reducing factory output by between 40% and 60%. In total the cost will be 140,000-170,000 fewer vehicles manufactured. Toyota had recently touted its ability to insulate itself from the global shortages that burned its peers thanks to stockpiles of components and close relationships with suppliers.
Ford and GM also are scheduling more downtime at North American factories, in part because virus-related restrictions overseas are further adding to chip-supply constraints. Ford this year has lost output of more than 160,000 F-150 trucks, its top-selling vehicle and main profit driver. GM expects to make 100,000 fewer vehicles in North America in the second half of this year.
For much of this year, the chip-shortage challenges in the auto industry have largely stemmed from car companies miscalculating how quickly auto sales would bounce back and not ordering enough semiconductors, writes The Wall Street Journal (Aug. 20, 2021). Now, the auto industry is confronting a new wrinkle with a resurgence in Covid-19 infections in Southeast Asia, particularly in Malaysia, denting output at computer-chip factories that are already straining to fill orders. This region is where semiconductors are assembled into small components that control everything from engines to headlights.
The shortage has had a silver lining for Toyota and other car companies because the dearth of cars on dealer lots has pushed up prices.
Classroom discussion questions:
- What techniques shown in Supp. 7 of your Heizer/Render/Munson text are available for matching capacity to demand?
- What is the cause of the global chip shortage, and what is the solution?