Thursday, September 23

The chip crisis paralyzes the automotive sector: “There are no cars to meet the demand”

This Thursday Mercedes-Benz has communicated to the staff of its factory in Vitoria that next week there is no work either. In none of the three shifts. It is the second week followed by a break and the management advances that everything indicates that more will come. The reason is the “critical” situation with microchips, which suffer from a worldwide shortage. The situation is repeated in all factories in Spain: Opel in Zaragoza, Stellantis in Vigo, Ford in Valencia or Seat in Martorell will stop one or more of their shifts this September. Renault has ERTE active in all its factories until the 30th.

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“The factories go up to date. They announce the stoppages from one day to the next, as the microchips run out. If microchips arrive, they are manufactured. If not, they stop,” Jordi Carmona, secretary of the automotive industry sector, explains to of UGT. “It is not an exclusive situation in Spain, not even in Europe. The crisis is global,” he details.

UGT estimates that this year between 400,000 and 500,000 vehicles will stop being produced in Spain. Such slowdown in manufacturing not only affects the 65,000 workers in the factories and the 230,000 in the auxiliary component companies, but also the availability of vehicles for sale. Registrations of passenger cars, SUVs and light commercial vehicles fell 29% in August compared to the previous year. The downward trend has been repeated month by month since the end of 2020, despite the fact that the data for 2021 is compared with that obtained in the toughest months of the pandemic.

“The summer has not served to see a change in trend in the automotive market, which remains at rickety levels mainly because there are not enough cars to meet the demand”, highlights Raúl Morales, communication director of the Faconauto dealer association . “The crisis of the microchips in the factories and the consequent lack of stock in most of the dealer networks is the factor that is weighing the registrations the most.”

The crisis of the microchips in the factories and the consequent lack of stock in the dealerships is the factor that is weighing the registrations the most

Faconauto, dealer association

The fear of the industry is that the situation “demobilizes buyers”, who do not want to wait up to six months to receive their new vehicle and opt for the second-hand market. Especially considering that the calculations are that the lack of stock is maintained, at least, throughout the remainder of 2021 and the first half of 2022.

The microchip crisis is affecting all electronics factories around the world, but the automotive sector is especially suffering from it. “As cars are increasingly connected, chips are increasingly important,” explains Noemí Navas, communication director of Anfac, the employers’ association of automobile manufacturers.

“There are no chips for anyone. What has happened to the automotive industry? That during the pandemic the supply chain broke because car factories closed, while there was a large increase in demand for technological products “Navas continues. “Chip suppliers shifted their production to those who continued to buy from them. When car production lines recovered, there was this tension between supply and demand.”

At this time the negotiations to manage the arrival of microchips are taking place in the highest offices of the brands, at the matrix level, which distribute them through their factories around the world. Unions and employers agree that Spain is well positioned in this regard, with a diversified production and a leading role in several models that are among the best sellers in Europe, such as the Seat Ibiza or the Opel Corsa. Still, the forecast is for enrollments to drop 25% from pre-pandemic levels.

The problem of not having your own chips

In what employers and unions also agree is that this situation should prompt a reflection on the great external dependence suffered by European industries that operate with electronic components. “This has shown that the outsourcing policies were a mistake. Outsourcing parts of the vehicle value chain to countries outside of Europe could bring about this problem. Unfortunately, it was the microchips that have shown it, but it could have been any other part of the vehicle “, emphasizes Carmona, from UGT.

Although microchips have become an indispensable resource in digitized societies, the world depends on a very small handful of companies to source them. The main one is the Taiwan Semiconductor Manufacturing Company (TSMC), which controls 60% of global production and 90% of the advanced microchip market. The pandemic and the resulting enormous demand for electronic products exceeded the company’s capabilities, which in turn has halted production lines for cell phones, computers and game consoles, but also cars or refrigerators. In the information age, everything has a chip.

Since the stock break that consumers began to notice at the end of 2020, TSMC has warned that the situation would take a long time. Microchip factories require extraordinarily advanced and expensive material, so it is not easy to increase production overnight. However, experts and environmental organizations have warned that the current shortage is not only a temporary problem due to the pandemic, but it is a structural crisis in which oil shortages, rare earths and climate change come into play.

To produce microchips a lot of water is needed to cool the machines, but “in Taiwan right now there is a shortage of water, a consequence of climate change. They normally fill the reservoirs during typhoon times, but this year there have been none, something that did not It had been happening for 58 years. They have had to divert water from the fields to the factories and now they even have to import it, “explained CSIC researcher Antonio Turiel in a recent report in this medium.

“This is not a bottleneck problem,” agree from Ecologists in Action. “It is no longer just that there are factories or not, it is that there has to be material that enters those factories. In the case of the Spanish State we have several rare earth mining plans sponsored by these new needs despite the fact that they are unsustainable exploitations “, highlights Julio Carmona, the person in charge of Digitization of the NGO.

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