Assignment1:
EEE452- Fall 2021
Section:5
Name:Ishrat Jahan
ID:1921909042
Impact of Global Crisis of Electronic Chips on the South
Asian Automotive Industry
COVID-19 put the world on halt. With lockdowns imposed all over, we faced many
issues. Currently the one in the limelight is the Global Electronic Chip Crisis. The
worldwide Electronic Chips shortage has paralyzed many industries of South Asia, but
the Automotive Industry is its most high profile victim.
The Automotive Industry is crippling compare to other industries that rely on electronic
chips. The global chip crisis is compelling more car companies to suspend production.
As a result, some companies have halted production of some of their best-selling
models and it has become tough to buy certain cars. On the other hand, some have
started to close plants due to chip shortages. As a result, the owners are facing
production delays and a cut down on profits. Moreover, factories remained idling due to
coronavirus restrictions, putting automakers even further behind.
The reasons this industry is the worst hit in Asia, is mostly because most automakers
abandoned their order for chips at the starting of the pandemic and by the time they
realized they needed more chips, the chipmakers were already dedicating time in
making chips for consumer tech companies. Besides, automotive industry mostly relies
on legacy chips that are not profitable for chips manufacturers, so the automakers are
left on waiting. According to the reports of I.C.I.S, global car giant, Toyota Motor Corp of
Japan faced a deep cut in production in September amidst the severe shortage of
electronic chips. The global production volume affected by these adjustments were
around 70,000 portions (40,000 portions overseas and 30,000 portions in Japan) for
September and 330,000 portions (180,000 portions overseas and 150,000 portions in
Japan) for October. The chip deficiency has additionally constrained India's greatest
vehicle producer, Maruti Suzuki, to cut production by 60%. (Bantillo, 2021) Car sales in
China in August dropped by one-fifth as there were fewer vehicles for people to
buy.Overall, many automakers of South Asia are feeling the same effects.
The usual demand for cars was high especially for the popular models. With the
breakout of the pandemic, as not expected by automakers, there was no sign that the
demand for cars was slowing. Instead, consumer purchases rebounded faster. Most
people avoided public transport and opted for private cars due to the virus. Initially the
industry cut production but due to high demand they started producing. Few models
were cut out due to limitations. As a result the car output slummed. Profit and revenue
faced downfall cutting factory output by several million vehicles thereby erasing billions
in revenue for car companies. Honda Motor slashed production in Japan, North America
and China. Nissan Motor scaled down in Japan, while Toyota Motor did so in the U.S.
(TING-FANG, 2021)
As per an article, the American based producers are the ones to endure the hardest hit.
It is said that more than 1.1 million vehicle is facing production delays. Ford, Stellantis,
and GM join for 855,000. Ford explicitly has five of the best 10 models facing delays,
including the biggest hit: the F-series at 109,710 deferred units. Different automakers
with less production situated in North America are facing far gentler effects. Asian
automakers Honda, Nissan, and Toyota are assessed to endure an aggregate shot of
108,549 delayed models; while Hyundai and Volvo have fewer than 3,000 vehicles
affected. No matter what, the worldwide car industry will put out 4 million less vehicles
and relinquish $110 billion as anticipated in 2021. (Lisa, 2021)
Most automakers of Asia are currently planning at least one pause on manufacturing to
let the supply of microchips catch-up. Some automakers have opted for the build-shy
strategy where they are dropping some features that require chips and are making the
more popular vehicles. This allows factories to keep running . Others are making
vehicles and parking them until chips become available while some have their own
ways to arrange chip. For example, Toyota, stockpiled chips at first yet they couldn't
recharge supplies after resurgence in Coronavirus across South Asia. Therefore, they
had to slash worldwide production by 40%.Still it kept up with its figure for 8.7 million
vehicle deals in the current financial year, up from 7.65 million last year. Sales volumes
also increased along with ratio of electrified vehicles.
The global shortage of electronic chips is starting to have a direct impact on economies
of countries. North America is supposedly the hardest hit. Their industry faced the most
decrease in sales due to the shortage while Japanese company Toyota of South Asia
increased sales at a certain period. Factories shutdown caused more people to lose
jobs. Tragically, the Chip deficiency is influencing a great deal of things including the
parts suppliers. Auto manufacturing companies that supply parts are getting hit with
here and there pattern. As the industry pauses for chips, the production eases and
afterward slops back. It causes huge amount of additional time and insane working
conditions. Rental car companies are also feeling the impacts as they're not able to
purchase the new vehicles they want. The low yield are driving costs up and compelling
buyers to buy vehicles that contrast from their favored choices.
The chip shortage has forced automakers to rethink both in short term and long term
ways of managing their chips. Some automakers are thinking about stockpiling chips
where others have talked about designing their own chips. Most decided to rely less on
few chip manufacturers. Besides, some automakers have thought about designing
components that will need fewer chips. (Wallach, 2021)
The Automotive business has been walloped by this tiny unscripted visitor which is
continuing to cause big headaches. This seemed as an extended issue, however it
could go on until 2023.In the meantime, there are a lot of positive sales, in spite of all
negative commotions.
Bibliography
Bantillo, P. (2021, September 29). I.C.I.S. Retrieved from
https://www.icis.com/explore/resources/news/2021/09/29/10690043/insight-asia-car-outputslumps-on-chip-shortage-petrochemical-demand-hit
Lisa, A. (2021, August 24). Retrieved from https://www.gobankingrates.com/money/economy/4-criticalindustries-affected-by-chip-shortage/
TING-FANG, E. S. (2021, January 22). Retrieved from https://asia.nikkei.com/Business/BusinessSpotlight/Asia-s-chip-crunch-slams-the-brakes-on-carmakers-COVID-recovery
Wallach, O. (2021, July 14). Visual Capitalist. Retrieved from www.visualcapitalist.com/global-chipshortage-impact-on-american-automakers