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September 25, 2021 04:34 pm

The Semiconductor Shortage is Getting Worse

"The global semiconductor shortage that has paralyzed automakers for nearly a year shows signs of worsening," reports the Washington Post, "as new coronavirus infections halt chip assembly lines in Southeast Asia, forcing more car companies and electronics manufacturers to suspend production."A wave of delta-variant cases in Malaysia, Vietnam and the Philippines is causing production delays at factories that cut and package semiconductors, creating new bottlenecks on top of those caused by soaring demand for chips... Demand for the components is soaring as more consumer goods become computerized, but supply is scarce because semiconductor factories are extremely expensive and time-consuming to build... The debacle is likely to cost the auto industry $450 billion in global sales from the start of the crisis through the end of 2022, according to Seraph Consulting. Martin Daum, chief executive of the Daimler AG division that makes trucks and buses, described the problem as intensifying. "Until the second quarter we were able to manage the situation quite well at Daimler Truck," Daum said Wednesday. "But since summer the semiconductor situation has worsened for us. Our production in Germany and the U.S. was affected, which led to a situation in which we could deliver fewer vehicles to our customers." Even automakers such as Toyota and Hyundai, which planned for potential shortages and initially managed to avoid crippling shutdowns, are starting to encounter problems. Toyota this month was forced to slash production at 14 factories in Japan over a lack of semiconductors. Some of the cuts will continue into October due to a lack of components from Southeast Asia, Toyota has said. Ford and General Motors in recent months have been suspending production for weeks at a time at more than a dozen North American factories... [T]he problem is hurting industries beyond autos. "This is having an impact all across the economy, with automobiles, yes, but even beyond that, into medical devices, networking equipment — we're hearing regularly from companies that cannot get the supply they need," one of the Biden administration officials said... Some chipmakers have taken steps to help auto manufacturers. Taiwan's TSMC, which produces a type of chip called a microcontroller that is widely used by automakers, said it is increasing output of the components by 60 percent this year compared with 2020. GlobalFoundries is adding manufacturing equipment to a factory near Albany, N.Y., to increase output for all types of chips, and recently broke ground on a $4 billion expansion of its factory in Singapore, with financial support from the Singaporean government. Globally, chip factories have increased their production capacity by 8 percent since early 2020 and plan to boost it by over 16 percent by the end of 2022, according to the U.S.-based Semiconductor Industry Association. Global spending on semiconductor manufacturing equipment is likely to grow by more than 30 percent this year to $85 billion, showing that chipmakers are expanding production, according to C.J. Muse, a semiconductor analyst at Evercore ISI. But that comes after chip companies had "underinvested over the last five years," he said... Intel on Friday will break ground on two new chip factories in Arizona, on which it plans to spend $20 billion.

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