Automakers Were Unprepared For Another Chip Shortage In China

In 2020, shortages in semiconductors led to a crisis in the auto industry. Prices soared across the board, with many cars reaching artificially high transaction prices as consumers fought over what vehicles were being pushed off assembly lines. It's taken years to unravel, but another problem emerged in China, per a Reuters report.

Semiconductor Supplies Tightened For Automakers

The catalyst for the most recent shortages comes from geopolitical tensions between the Netherlands and China. The Dutch government recently took control of the Netherlands-based Nexperia in late September, following concerns over European production being moved to China should the semiconductor manufacturer be purchased by another Chinese company, Wingtech. Notably, though it does have operations based in Europe, Nexperia's semiconductor chips are built in China. The Chinese government halted exports of chips following the decision. Then, the Netherlands reversed course, saying it wouldn't take over the company after the Chinese halted chip exports.

Nexperia makes semiconductors and sells them to automakers like Nissan, Honda, Volkswagen, Toyota, and Mercedes-Benz. Already, shortages from the dispute have caused Nissan and Honda to cut production, while Bosch, a German parts supplier, was pushed to cut factory working hours. This time, comfort led to the shortage, says Reuters. "Nexperia's chips were seen as so cheap and available that one European automaker didn't normally prepare alternative supplies, said one person at the carmaker. The chips are 'very ordinary electronics with low prices,' said this person, who, like most of those interviewed, spoke on condition of anonymity to discuss sensitive information."

Some Were Ready, But Most Weren't

Most automakers suffered under the last round of semiconductor shortages. Some, like Toyota, have quickly implemented policies to help keep goods flowing. It says it keeps "several months' supply of chips as part of the business continuity plan developed after the devastating 2011 Japan earthquake." However, continued shortages may still impact the company, said one spokesperson.

Nissan says it is still working to patch up its more vulnerable supply chains. "I know what everyone will tell me, 'Ah, but you didn't learn from the past,'" Nissan Chief Performance Officer Guillaume Cartier said to Reuters. "Yeah, OK. But do you believe you change all your supply in three years?" Other suppliers, like Hella and Bosch, find themselves preparing for another shortage, but cost is an issue. One source in the auto supply industry said, "Everyone is going to start talking once again about building resilience, about diversification," he said. "And then they're going to realise how expensive it is."