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Chip shortages still plague carmakers despite weaker semiconductor demand

Volvo temporarily shuts one factory while Toyota downgrades production forecast

Demand for semiconductors may be falling, but automobile manufacturers still face chip shortages and supply issues to the extent that some are halting or cutting production.

Despite predictions from some industry watchers that the end of chip shortages is in sight and lead times are falling, shortage of key components is still affecting some car makers. The latest is Volvo, which said this week it is temporarily closing one of its factories.

A Volvo spokesperson told Gothenburg newspaper Göteborgs-Posten that the factory will be closed for seven days, stating that demand for vehicles is good, but ongoing problems with semiconductor shortages are affecting output.

Toyota also announced just days ago that it is continuing to be hit by chip shortages at its car plants across Japan, issues that have dogged the company for much of this year, resulting in it suspending manufacturing in May and June at many of its production lines.

The Japanese car giant issued a statement apologizing for repeated adjustments to its production plan, and said that due to semiconductor shortages, its planned global production volume for November is expected to be approximately 800,000 units.

As a result of this change, the full-year production forecast for Toyota's fiscal 2023 is expected to be lower than the previous forecast of 9.7 million units, the company said.

In its Q3 earnings results, GM said there has been a gradual improvement in the supply chain, including semiconductors. It expects short-term disruptions to continue, but said it was taking steps to minimize these, including signing several strategic supply agreements for mature nodes where semiconductor supply is most constrained.

Meanwhile, chipmaker Texas Instruments signaled during its latest earnings call that it expects revenue and profits for the latest quarter to be below previous estimates, blaming the fall in demand for chips.

TI expects to see revenue in the range of $4.4 billion to $4.8 billion for Q4, lower than analyst forecasts of $4.9 billion.

For the third quarter just ended, TI's revenue came in about as expected at $5.2 billion, an increase of 13 percent compared with the same quarter last year, and 1 percent up on the previous quarter this year.

The company is a big player in the automotive semiconductor industry, with industrial and automotive making up 62 percent of its revenues, according to Head of Investor Relations Dave Pahl, who said that the automotive market remains strong while weakness is beginning to broaden in the industrial market.

However, Pahl said that TI expected the correction currently affecting the rest of the semiconductor market would eventually hit the automotive sector as well.

"Will that market eventually roll over? It will. I mean, that's just what happens. And we are not trying to predict when that will happen, we will continue to ship product to customers as they request it," he said.

Richard Gordon, Gartner VP for Semiconductors & Electronics, told us that the chip supply situation continues to improve, but will probably not be fully resolved until next year.

"It only takes a supply glitch affecting one chip type (e.g. power management) to cause a disruption to electronics production, and there are issues specific to the automotive space that are taking longer to re-balance," Gordon said. "These include issues with the shift to EV on the demand side and a need for legacy capacity on the supply side."

Gordon added that he still expects to see demand from the automotive sector weaken in coming months, along with the hyperscale datacenter sector, where shortages have also taken longer to dissipate. ®

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