Chip Shortage Slows Car Production

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st13phil

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From the front page of the FT today:
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Yet another example of how JIT supply chains are vulnerable to rapid changes in demand.

I wonder if the penny will actually drop this time? One would have hoped that the Fukushima disaster and the disruption to deep global supply chains that caused would have encouraged a shift to greater supply chain resilience, but apparently not.
 
Interesting. Of course the market for new cars in the UK was already in deep trouble:

New car registrations in 2020 dropped to their lowest annual level since 1992, in figures released by the SMMT (Society of Motor Manufacturers and Traders).

A total of 1.63 million new cars were registered last year, down 680,076 vehicles, or 29.4 per cent, on 2019. That represents the biggest decline since 1943, when car plants switched over to munitions manufacturing during the Second World War.

 
Honda have already stopped production twice for the same reason. The media would of course want to blame it on Brexit but that can't be if Audi are also affected.

JIT manufacturing becomes more and more of a risk as cars become vastly more complex. In many cases unnecessarily complex for the primary function of the car. It might be that Audi are being held up merely for the want of toys. It would amuse me to hear that a company like Dacia had no such problems because they build simpler cars.
 
JIT manufacturing becomes more and more of a risk as cars become vastly more complex. In many cases unnecessarily complex for the primary function of the car. It might be that Audi are being held up merely for the want of toys. It would amuse me to hear that a company like Dacia had no such problems because they build simpler cars.

If Rernault were affected I guess Dacia would be affected.

The issue with JIT is compounded by what globalisation has achieved - which is this super concentration of technology expertise / production and specialised knowledge into just a few key companies or geographic areas.

We have strategic supply chain dependencies that are 30+ years in the making. In human terms that's a generation or a whole career. In civilisation and geo-political terms that's a long period of stability which everybody has become so used to that they don't question - and assume is the norm.
 
As said Honda Swindon had a few stops before Christmas due to part shortages, but interestingly they kept the line (sort of) going by pushing the affected vehicles off the end of the line (they usually drive off under their own power) so that they could get the Japanese export cars in the mix further down the line finished and off British soil before the factory closed for Christmas to avoid any tariff 'problems' with the export models before 31st December 2020.

Just in time manufacturing is a calculated risk (essentially gambling) that requires everything to run 'just right' . Most suppliers to car factories have an agreed 'build ahead' policy which - for example - require a minimum buffer of say 14 hours before things got close enough to stop the supplied factory from building cars.
 
Rumour has it that chip production priority has been switched due to increased demand for games consoles, computers, tablets and other handheld devices such as smartphones-- this due to unprecedented demand for home entertainment/communication devices prompted by restricted movement due to COVID 19 ??
 
Lead times for many components that we were using after 2017 was typically 26 weeks.
That meant a constant engagement with many customers trying to get them on board to forecast and lock in critical components.
Of course many would not and then end up screaming when they could not get that Solid State relay or Processor to make another batch of their products within a few months.

For chips when they say computer chips then lead times on these of half a year and more are the normal.
My guess is the car manufacturers (well the firms making the electronics) have simply backed off their orders.
When the vehicle manufacturers want more parts they place orders, the manufacturer places a new order and 6 months plus down the line the part will be available then factor in the factory lead time to make the product.
Likely much longer for massive operations given that our small organisation would try and work 6 months in advance.

Also imperative to have all the parts and not possible to switch out to alternates if not on the approved (tested for EMC, CE etc.) list.
Only takes 1 x 0201 inductor with a cost of maybe 0.001p to stop the line.

There has also been a massive increase we have seen in MLCC (chip capacitors) since around 2017, we had huge problems and ended up buying in a years plus stock back then.
A lot of this is due to the smaller size and more parts used in many consumer electronics and some vehicles.
Typical older iPhones were using 500 MLCC with new ones over 1,000.
Same for cars, ICE cars may have a few thousand MLCC but the likes of a Tesla maybe 10,000 MLCC.

Good article here from one of our suppliers that talks about MLCC in particular.
Avnet: Quality Electronic Components & Services
 
Well a result for the car companies they could not sell what they were making,maybe those airfields full of cars will start to empty.
 
The brown stuff really has now hit the fan.

Worldwide shortage on Microcontrollers.

Lots of products now can't be manufactured due to the shortages with many Contract Manufacturers simply on stop due to no parts.

For the parts that are available many companies are redesigning their products to use the alternate parts so this is eating up availability on less popular parts.

We have 1 customer who is on their 4th PCB revision and yet to build a board!
 
The brown stuff really has now hit the fan.
The MINI plant at Cowley has been on short time working for months now due to chip shortages.

A global shortage of microcontrollers could easily cause a direct stop of many automated processes. Not good.
 
News yesterday in the FT was that MB have raised new car prices to manage demand and plan to keep it that way: https://www.ft.com/content/f55a1d96-1146-4e17-88a9-1a0fbaf57de6

Key point: “We will consciously undersupply demand level,” Harald Wilhelm, Daimler’s chief financial officer said, “and at the same time we [will] shift gears towards the higher, the luxury end...one day or another the semis issue will be gone and we will carry on with the price, and the margin, and the mix focus”.

The story was also reported elsewhere today, without a paywall: Mercedes-Benz and BMW to keep high prices after semiconductor crisis
 
Key point: “We will consciously undersupply demand level,” Harald Wilhelm, Daimler’s chief financial officer said, “and at the same time we [will] shift gears towards the higher, the luxury end...one day or another the semis issue will be gone and we will carry on with the price, and the margin, and the mix focus”.

The translation .....

"Oh sh*t."​

"We need to increase margins in the short term by putting up prices while our volumes are reduced."​
"We can't tell people that it is a short term measure or they will defer purchase and our volumes will reduce further."​
"We can't say prices will fall back because that will affect residual values and our finance arms and increase costs on PCPs and Leases."​
"If everybody falls for this we can raise prices, keep PCP monthlies capped through high residuals, and optimise volumes and margins to our production"​
"Hope nobody asks us about what happens if interest rates go up"​







 
Sound strategy or hubris? time will tell
Either way, MB seems to be a marque that is in huge demand so for now they can get away with such a pricing strategy. In the longer term? Maybe it will work if they really do go back up-market like the old days. I would certainly be willing to pay more for an E-class that is truly well-engineered and lasts for ever - much as I do for premium German white goods.
 
Either way, MB seems to be a marque that is in huge demand so for now they can get away with such a pricing strategy. In the longer term? Maybe it will work if they really do go back up-market like the old days. I would certainly be willing to pay more for an E-class that is truly well-engineered and lasts for ever - much as I do for premium German white goods.
They will need to up their game reliability /longevity wise----the mass market mindset "never mind the quality feel the width " will have to be recalibrated-----the present problem of a shortage of MB electronic components being a case in point---- still , MB owners can comfort themselves that their unobtainable parts are more expensive/higher quality than lesser marques unobtainable parts. ;)
 
It would be interesting to know if MB prioritised getting EVs built and shipped to customers, over ICE cars.
 
It would be interesting to know if MB prioritised getting EVs built and shipped to customers, over ICE cars.

Good point, you would hope that MB is allocating any stock of unobtainable items evenly based on demand regardless of powertrain, but I wouldn't put it past them (or any car manufacturer) to divert stock EVs; given that's where the new technology is and possibly the highest margins in car sales.
 

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