Semiconductor shortage disturbs manufacturing

21 December 2020

21 December 2020

Automotive manufacturers are warning of a shortage of vital electrical components. Among them, Volkswagen Group has (VW) adjusted production due to a ‘massive semiconductor bottleneck.’ The carmaker cautioned that short supply of the vital electrical component is causing considerable disturbances for manufacturers globally, with Continental and Bosch also raising warning flags.

As the automotive industry watched its sales slump throughout 2020 due to the coronavirus (COVID-19), semiconductor suppliers reassigned production capacities to other sectors, like consumer electronics. But as carmakers looking to make an electrified comeback, they face a shortage in an essential component.

‘Feeling the effects’

Due to this bottleneck, VW will adjust production at some of its facilities in China, North America and Europe in Q1 2021. Models based on the MQB platform belonging to VW Passenger Cars, VW Commercial Vehicles, Skoda, SEAT and to an extent, Audi, are all affected. The manufacturing group said it is continually reviewing countermeasures and alternatives to try and limit the effects of the bottleneck and the number of affected vehicles.

‘To date, we have weathered the crisis well thanks to outstanding procurement and production management,’ said Murat Aksel, designated Volkswagen Group board of management member responsible for purchasing.

‘However, we are now feeling the effects of the global semiconductor bottleneck. We are doing everything in our power to minimise lost production and to ensure that normal deliveries to customers can be resumed as rapidly as possible.’

Elongated bottlenecks

Other manufacturers have also been warning that the supply of vital electrical components is under threat. Manufacturers Continental and Bosch issued cautions about a shortage of semiconductors. Continental told Autovista Group Daily Brief that disruption due to COVID-19 has caused extreme volatility, particularly in the automotive industry.

‘After the industry shut down in the early phase of the Coronavirus crisis (April-May) and the resulting abrupt drop in demand, the automobile manufacturers, especially in China, were increasing their production volumes much faster than foreseeable and expected by market experts some months ago,’ the OEM said. ‘This results in supply shortages, in particular for semiconductors.’

However, Continental does recognise that semiconductor manufacturers have also been hit by the pandemic. ‘In the meantime, they have responded to the unexpected demand by increasing their supply. However, due to the usual long lead times in the semiconductor industry, the required additional volumes will only be available with a considerable delay. So, the potential bottlenecks will extend into 2021.’

Continental went on to say that it is working ‘around the clock’ with its customers and suppliers to minimise the effects of the semiconductor shortage, however, they could not rule out potential disruptions in production.

‘No supplier can elude this market development,’ Bosch said at the beginning of December, as reported by Reuters. Bosch said that it was in close contact with its suppliers and customers to maintain the supply chains as much as possible despite the tense market situation.

As vehicles become smarter with more connected technology, and powertrains take the electric leap, components like semiconductors become even more vital in the production process. As different industries compete for what appears to be a limited supply, any effort to recover from the impact of COVID-19 by the automotive industry lies in the balance. Furthermore, if manufacturers are unable to fully commit themselves to electromobility, the potential for them to meet strict emissions targets dwindles.