Global Chip Shortage May Extend to 2023, Says Reports
In a recent announcement, auto manufacturer Toyota stated that they will now cut worldwide vehicle production by 40% in September. This will reduce their output to 540,000 vehicles, down from their planned output of 900,000. As a result, Toyota shares fell 4.4%, the largest daily drop the company has seen since December 2018. Other manufacturers such as General Motors, Ford, Nissan, Daimler, BMW, and Renault have already announced similar plans throughout the year.
The main reason for such measures? The global chip shortage.
Signs of issues began late last year at the height of the COVID-19 pandemic and were mostly relegated to consumer products such as smartphones, video game consoles, and similar products. Gradually, however, various other industries cited similar issues, and today many experts are anticipating that not only will these issues continue, they will now stretch well into 2022 and beyond.
“It’s going to be a year – to two years – until we’re back to some reasonable supply-demand balance,” said Pat Gelsinger, Intel’s chief executive. Even more concerning, he stated that the “second half of this year” might even be worse than the first half. Federal administrations around the world are quickly trying to makes moves to mitigate the damage; in the U.S., for example, President Joe Biden has signed an executive order to seek $37 billion in funding to increase chip production on U.S. soil.
There is no one cause for the global chip shortage but many. COVID-19 is certainly the largest factor, with component manufacturers trying to balance productions levels with employee health and safety, as well as any COVID-related regulations or mandates placed by applicable governing bodies. Another factor is the geopolitical tensions between the U.S. and China, as well as China’s new focus on wealth redistribution. Through all of these causes, however, is a binding thread that shows that international manufacturing supply chains, as it relates to semiconductors, runs through Asia.
“Not that long ago, America led the world in making leading-edge semiconductor chips. Today we produce 0% of those chips in America — 0%,” said Commerce Secretary Gina Raimondo in a recent testimony before Congress. “That’s a national security risk and an economic security risk.”
With little relief in sight until perhaps even 2023, the manufacturing community should be making every effort to insulate their supply chains from disruption, which, as 2021 has proven so far, is rarely predicted but always inevitable. Factors such as international geopolitical tensions and global pandemics may beyond control, but supply chain integrity is not.