Toyota cuts vehicle production over global chip shortage

Just as Samsung pledges to invest $360b to shore up next-gen industries

Toyota is to slash global production of motor vehicles due to the semiconductor shortage. The news comes as Samsung pledges to invest about $360 billion over the next five years to bolster chip production, along with other strategic sectors.

In a statement, Toyota said it has had to lower the production schedule by tens of thousands of units globally from the numbers it provided to suppliers at the beginning of the year.

"The shortage of semiconductors, spread of COVID-19 and other factors are making it difficult to look ahead, but we will continue to make every effort possible to deliver as many vehicles to our customers at the earliest date," the company said.

This has resulted in the suspension of manufacturing in May and June for 16 Toyota production lines in 10 plants, out of 28 lines across 14 plants, according to the company.

The news is just the latest in the saga of shortages caused by lockdowns and other issues that have led to long delays in chip shipments affecting multiple industries.

In April, Volvo cited chip shortages for a 22.1 percent drop in sales of its vehicles in March, when compared to the same period the previous year. Jaguar Land Rover, General Motors and others say they've also felt the squeeze this year.

Car manufacturers were particularly badly hit due to lack of flexibility in the supply chain, but the effects are also being felt by makers of computers and other kit, with Dell reporting in February that it is expecting the backlog to grow. Chipmaker TSMC warned in April that supply difficulties are likely to last through this year and into 2023.

Amid all this, Samsung has announced that it plans to invest about $360 billion in total over the five years to drive growth in semiconductors, biopharmaceuticals, and other next-generation technologies.

The investment represents an increase of more than 30 percent over the previous five-year period, and comes with the expectation that this will lead to the creation of 80,000 jobs, mostly in semiconductors and biopharmaceuticals and most of these likely in Samsung's backyard.

According to Reuters, Samsung said 80 percent of the investment will be made in South Korea and that the announcement includes a ₩240 trillion ($206 billion) investment pledge made by the company in August 2021.

While the move may be welcomed by many, it is unlikely to ease the chip shortage pain currently being felt by many hardware makers and their customers. However, Richard Gordon, Gartner practice vice president for semiconductors and electronics, said we may now be past the worst of it.

"We've just seen a classic peak in the semiconductor market – chip shortages, prices rises, inventory build-up, all of which led to a very high growth year and record revenues in 2021. But this is a cyclical market. The shortage situation is easing; I think we are past the peak in the cycle," Gordon told us last month.

"On the supply side, capacity is going to come on-stream progressively from 2022 onwards and supply chain disruption in places like China will cause sporadic glitches in electronics production."

However, both Samsung and TSMC, the two largest contract semiconductor manufacturers in the world, announced earlier this month that they are planning to increase the prices they charge customers for manufacturing chips, which will likely lead to a hike in the prices that enterprises and consumers pay for products.

Earlier this year, Samsung announced revenue of $63.8 billion for Q4 2021, up 24 percent year-on-year, with operating profits up almost 5 percent, despite the fact that it failed to meet its own guidance for DRAM and NAND shipments during final three months of the year. ®

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