Wednesday, October 20

The chip crisis could cost the automotive sector 180 billion, double what was expected

The global microchip crisis does not go back. For the automotive industry it is dealing a particularly serious and unexpected blow. The shortage of electronic components prevents him from finishing the vehicles that enter the production line, which accumulate in tents next to the factories waiting for the shipments of chips with which to finish them. But these arrive at the drop of a hat, as do the cars available for sale at dealerships.

Dismantling 10% of the weight of the automotive industry in GDP, used to justify millions in public aid

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A new report prepared by the consulting firm AlixPartners points out that manufacturers will stop earning 210,000 million dollars (180,000 million euros) worldwide due to the lack of chips. It is almost double the 110,000 million that the same consultancy had foreseen in its last report, prepared in May. Estimates now are that 7.7 million fewer cars will be manufactured than the industry had forecast for this year.

“Everyone expected the chip crisis to have subsided more by now, but unfortunate events like the COVID-19 lockdowns in Malaysia and ongoing problems elsewhere have made things worse,” says Mark Wakefield of AlixPartners. “At the moment there is no response capacity in industry when it comes to producing or sourcing material. Practically any shortage or interruption of production in any part of the world affects companies around the planet “, they explain from the consultancy.

The situation is having resounding echoes in Spain, where the automotive sector employs some 300,000 people between factories and auxiliary component companies. All manufacturers have announced new stoppages starting this month due to the lack of components. Seat has been the last to sign an ERTE with the unions that affects the entire workforce of the factories, who will take turns to work depending on the arrival of chips. At least 482 workers will be unemployed per day. At most 1,276. The file began this Monday and will be active, at least, until June 30, 2022.

The automotive industry has no ‘bumpers’. Any shortage or interruption of production anywhere in the world seriously affects manufacturers around the world

The industry no longer expects any stockout improvement before then. The darkness of the semiconductor tunnel has been getting longer and longer. First, the manufacturers spoke of this September as the date to return to normality. Then they left at the end of 2021. Then, to the first quarter of 2022. Reality has engulfed each of those expectations and now the sector recognizes that it could be “years” until the sector can function as before the pandemic, Herbert Diess, president of the Volkswagen Group, pointed out in an interview in Bloomberg television.

“It gives us the feeling that it is taking a long time because the coronavirus crisis, which is what has caused everything, is also lengthening,” Crisitian Castillo, professor of Economics and Business at the UOC and specialist, explains in conversation with this medium. in Logistics. “The virus does not remit and the new variants have caused strict confinements in Asia, especially in Malaysia. Now with the arrival of winter there may be more restrictions and impact on international container transport. Surely until May 2022 we will not be able to see any light in the future. end of the tunnel “.

China tightens, the world drowns

At the moment the waiting list in Spain to buy a new vehicle can be extended from four to six months. According to the Spanish employers’ association of manufacturers, 25% fewer cars have been produced than expected so far this year, while registrations are at a minimum.

How did we get here? If you ask the industry, their short answer will cite the coronavirus. The pandemic coincided with the closure of car factories during strict lockdowns with a worldwide explosion in demand for electronic devices. Chipmakers shifted production to new buyers, and now, with factories reopening, there are no chips for everyone. The waiting list to receive chip shipments in some cases exceeds five months.

China is stockpiling microchips as part of its protectionist strategy. Only in June 2021 they imported 38,000 million dollars of microchips, 29% than in 2020

But there is also a long answer. It includes the great concentration that exists in the chip production sector, the relocation that has occurred in Europe, issues related to the shortage of materials and climate change. Also geostrategic derivatives, since the tension between China and the US is also influencing. “China is stockpiling microchips as part of its protectionist strategy. Only in June 2021 did they import $ 38 billion of microchips, 29% more than in 2020 “, explains Castillo.

Added to the possible setbacks generated by the coronavirus, the result is a perfect storm. “It is a totally unprecedented situation,” emphasizes the professor. “Today the manufacture of chips is divided between two companies, a Taiwanese that is TMC and the other that is Samsung, Korean. There are no alternatives to get semiconductors and yes or yes you have to go through these two manufacturers”, details.

Europe has put in place policies to mobilize its industrial fabric, establish semiconductor factories and recover part of that technological sovereignty. The problem is that microchip plants require very advanced machinery, a huge initial investment and almost three years to get up and running. Intel’s CEO announced at the Munich auto show in early September that his company will build two microchip factories in Europe. The total investment of the American company could reach 80,000 million euros.

“Being so important is the automotive sector in Europe, it is not understood how a sector as important as semiconductors has been allowed to end up relocated to Asia. Now there is a dependency that seriously affects European companies,” laments Castillo .

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