Tag Archives: Semiconductor

7.4 Earthquake Causes Semiconductor Supplier to Halt Production for Major Car Companies

Important Takeaways:

  • Toyota, major chip supplier suspend production due to earthquake in Japan
  • The earthquake adds to already tumultuous times for the automotive industry involving supply chain problems due to Covid-19 and Russia’s invasion of Ukraine.
  • As companies monitor and assess potential residual impacts of Wednesday’s 7.4 magnitude earthquake on their supply chains, auto companies most immediately impacted included Toyota Motor and Renesas Electronics, a major supplier of semiconductor chips for the automotive industry
  • The world’s largest automaker by volume said 18 production lines at 11 plants (out of 28 lines at 14 plants) would be down for three days next week due to supply problems caused by the earthquake.
  • The Tokyo-based semiconductor supplier said it’s attempting to restart the plants and return them to pre-earthquake production volumes

Read the original article by clicking here.

Price pinch: global economy caught in perfect storm

By Guy Faulconbridge, Andrew MacAskill, Daniel Leussink and Leika Kihara

LONDON/TOKYO (Reuters) -From beef bowls in Tokyo to fried chicken in London, consumers are beginning to feel the pinch from the surge in costs coursing through the global economy.

The rebound in economic activity as coronavirus restrictions are eased has exposed shortages across supply chains, with companies scrambling to find workers, ships and even fuel to power factories, threatening the recovery.

Britain’s biggest chicken producer warned that the country’s 20-year cheap food binge is coming to an end and said food price inflation could hit double digits.

“The days when you could feed a family of four with a 3 pound ($4) chicken are coming to an end,” Ranjit Singh Boparan, owner of the 2 Sisters Group, said.

An acute shortage of warehouse workers, truckers and butchers as the world’s fifth-largest economy deals with Brexit as well as COVID-19 is exacerbating strains which are being felt globally by international business.

IKEA is leasing more ships, buying containers and re-routing goods between warehouses as the world’s largest furniture brand seeks to mitigate a “perfect storm” of global supply chain disruptions.

Jon Abrahamsson, chief executive at Inter IKEA, told Reuters he expects the crisis to extend into 2022, with the biggest challenge getting goods out of China, where around a quarter of IKEA products are made.

IKEA said stores in North America have been hardest hit by product shortages, followed by Europe.

In the United States, President Joe Biden on Wednesday urged the private sector to help ease supply chain blockages that are threatening to disrupt the U.S. holiday season.

Biden said the Port of Los Angeles would join the Port of Long Beach in working round-the-clock to unload about 500,000 containers, while Walmart, Target and other big retailers would expand overnight operations to help out.

Even in Japan, where weak growth has meant that prices of many things – as well as wages – haven’t risen much in decades, consumers and businesses are facing a price shock for basics such as coffee and beef bowls.

Japan’s core consumer inflation only stopped falling in August, snapping a 12-month deflationary spell. Economists and policymakers expect to see recent price rises reflected in official data in the coming months.

With central bankers on high alert and inflation in Spain, Ireland and Sweden hitting 13-year highs, European Central Bank President Christine Lagarde repeated that the upswing in Europe is seen as temporary and said there were no signs that the recent surge is becoming embedded in wages.

“The impact of these factors should fade out … in the course of next year, dampening annual inflation,” Lagarde said.

Euro zone inflation is expected to hit 4% before the end of the year, twice the ECB’s target, and a growing number of economists see it remaining above target throughout 2022.

COLD FRONT

Dwindling power supplies suggest a bleak winter outlook in some parts of the world.

As northern China chills, coal prices held near record highs, with power plants stocking up to ease an energy crunch that sent factory gate inflation in the world’s second-largest economy to an at-least 25 year high in September.

Meanwhile, Coal India, the world’s biggest coal miner, said it had temporarily stopped supplying non-power users as India battles one of its worst ever power supply deficits.

China’s power crisis, caused by shortages of coal, high fuel prices and booming post-pandemic industrial demand has halted production at numerous factories, including many supplying big brands such as Apple.

Weak demand is capping consumer inflation, however, forcing policymakers to walk a tightrope between supporting the economy and further stoking producer prices.

There are few signs of any reprieve in energy costs, with Brent crude oil futures above $84 a barrel on expectations that soaring natural gas prices will drive a switch to oil to meet winter heating needs.

The International Energy Agency said the crunch could boost oil demand by half a million barrels per day (bpd).

“Higher energy prices are also adding to inflationary pressures that, along with power outages, could lead to lower industrial activity and a slowdown in the economic recovery,” the IEA said in its monthly oil report.

Top economic institutes cut their joint forecast for 2021 growth in Germany, Europe’s largest economy, to 2.4% from 3.7% as supply bottlenecks hamper output, confirming a Reuters story.

In response to the crisis, the White House has been speaking with U.S. oil and gas producers about helping to bring down fuel costs, two sources familiar with the matter said.

The average U.S. retail cost of a gallon of gasoline is at a seven-year high, and the U.S. Energy Department expects winter fuel costs to surge. Oil and gas production remains below the nation’s peak reached in 2019.

CHIPS STILL DOWN

Dutch navigation and digital mapping company TomTom warned that supply chain problems in the auto sector could last well into 2022.

“Collectively we have underestimated how big the supply chain issues, and especially for semiconductor shortages, have been or have become”, TomTom Chief Financial Officer Taco Titulaer told Reuters.

A global semiconductor chip shortage has forced carmakers still recovering from coronavirus disruptions to halt production again.

Italian-American vehicle maker CNH Industrial said on Wednesday it will temporarily shut several European agricultural, commercial vehicle and powertrain manufacturing plants because of problems procuring components.

Soaring demand is, however, proving a boon for some.

Taiwan’s TSMC, the world’s largest contract chipmaker, reported a nearly 14% jump in third quarter profit.

TSMC and Taiwan have become central to efforts to resolve the global chip shortage, which has also hit manufacturers of smartphones, laptops and consumer appliances.

Some companies, such as Toyota Motor Corp are intensifying efforts to restart production. The Japanese carmaker hopes to do so in December with a rebound in shipments from pandemic-hit suppliers, three sources told Reuters.

(Additional reporting by Muyu Xu, Shivani Singh, David Stanway, Noah Browning, James Davey, Liangping Gao, Stella Qiu and Ryan Woo; Writing by Alexander Smith; Editing by Carmel Crimmins and Catherine Evans)

‘Desperate for tires’ Components shortage roils U.S. harvest

By P.J. Huffstutter and Mark Weinraub

CHICAGO (Reuters) – Dale Hadden cannot find any spare tires for his combine harvester. So the Illinois farmer told his harvest crew to avoid driving on the sides of roads this autumn to avoid metal scraps that could shred tires.

New Ag Supply in Kansas is pleading with customers to order parts now for spring planting. And in Iowa, farmer Cordt Holub is locking up his machinery inside his barn each night, after thieves stole hard-to-find tractor parts from a local Deere & Co dealership.

“You try to baby your equipment, but we’re all at the mercy of luck right now,” said Holub, a fourth-generation corn and soybean farmer in Buckingham, Iowa.

Manufacturing meltdowns are hitting the U.S. heartland, as the semiconductor shortages that have plagued equipment makers for months expand into other components. Supply chain woes now pose a threat to the U.S. food supply and farmers’ ability to get crops out of fields.

Farmers say they are scrambling to find workarounds when their machinery breaks, tracking down local welders and mechanics. Growers looking to buy tractors and combines online are asking for close-up photos of the machine’s tires, because replacements are expensive and difficult to find, said Greg Peterson, founder of the Machinery Pete website which hosts farm equipment auctions.

“As harvest ends, we will see farmers at equipment auctions not for the machinery – but for parts,” Peterson said. “We’re already hearing from guys talking about buying a second planter or sprayer, just for parts.”

For some farmers, the shortages are forcing them to reuse – or repair – old parts.

At their small welding shop in western Washington, Rami and Bob Warburton can barely keep up with all the orders from farmers needing something repaired from fittings for irrigation systems to a cracked bulldozer bucket.

“We were in the middle of a drought up here,” Rami Warburton said. “At that time, they couldn’t wait to water their fields for a month. The crops will be dead by then.”

‘TYLENOL MOMENTS’

Kinks in the supply chain due to COVID-19 shutdowns in manufacturing hubs in the United States and Asia, a container shortage snarling major ports, and a dearth of workers prevent equipment manufacturers from fully cashing in on a lucrative moment, when grain prices have soared to the highest in nearly a decade.

The Purdue University/CME Group Ag Economy Barometer, a monthly measure of farmer economic sentiment, fell 10% to its lowest level since July 2020 in early October. Supply concerns are weighing heavily on growers, with 55% of farmers surveyed saying that low inventories have affected their plans to buy machinery.

Access to steel, plastic, rubber and other raw materials has been scarce during the pandemic, and manufacturers are preparing for even more shocks after power shortages forced several Chinese smelters to cut production in recent weeks.

When executives from farm machinery maker AGCO Corp visited Midwest suppliers this summer, they found some companies were operating at only 60% staffing levels, said Greg Toornman, who oversees AGCO’s global supply chain management.

Toornman said staff levels are dropping at some suppliers in the Dakotas, Nebraska and Texas, as workers object to President Joe Biden’s vaccine mandate, drop out of the workforce for fear of getting COVID-19 or move to other jobs.

“It’s the perfect storm of Tylenol moments,” Toornman said. “It’s one headache after another.”

The supply squeeze has put particular pressure on equipment dealerships, who typically see their service business boom during the traditional September through November harvest season.

This year, some have resorted to sifting through decade-old inventory for solutions. One pain point for dealerships is an industry-wide shortage of GPS receivers, which are used to run tractor guidance and data systems.

At Ag-Pro, the largest privately-owned Deere & Co dealership in North America, staff in Ohio have been digging out GPS units that date back to 2004. Until now, they were essentially worthless.

But producers can still use them to record a digital harvest map of their farms – something many need when talking to their bankers, landlords and crop insurance agents.

COMPONENTS TRIAGE

Equipment manufacturers are faced with a painful choice this harvest season: Send parts to factories to build new tractors and combines to sell to farmers or redirect those parts into the field to repair broken equipment for existing customers?

For AGCO and rival manufacturer CNH Industrial N.V., the answer is the latter.

“You can’t afford not to support those customers in the field,” AGCO’s Toornman said. “When you’re harvesting, timing is everything.”

CNH estimates that supply chain constraints ranging from increases in freight to higher raw materials prices have cost the company $1 billion.

That lag has forced the company to turn some factory parking lots into storage lots. At CNH’s combine plant in Grand Island, Nebraska, hundreds of unfinished combines sit outside, waiting for parts.

Meanwhile, CNH is redirecting components that can be used on its Case IH and New Holland equipment to customers in the field, a company representative said.

CNH has been signaling to dealers that supply chain problems and parts shortages for Case IH farm equipment are ongoing, according to Reuters interviews with six dealers. The manufacturer said in a statement it is meeting customer needs “the best we can given these unprecedented challenges.”

Deere said it is reorganizing shipping containers to make more room for goods, leasing extra cranes to expedite unloading ships at ports, and expanding its trucking fleet.

But component shortages are “particularly challenging for farmers facing what is already a short window of time to harvest,” said Luke Gakstatter, senior vice president of Deere’s aftermarket and customer support.

In some cases, the company has delivered unfinished machinery to customers. Missouri farmer Andy Kapp’s brand new combine rolled off the assembly line missing some of the high-tech cameras that help provide the very efficiency he paid hundreds of thousands of dollars for.

But he is using it anyway, and even has stocked up on some extra parts, in case the combine breaks down.

“As you get toward the end of harvest, machinery and people get more tired,” Kapp said. “It’s a new machine. It won’t surprise us if there are a few loose bolts.”

(Reporting By P.J. Huffstutter and Mark Weinraub in Chicago; additional reporting by Dane Rhys in Monroeville, Ohio; Editing by Caroline Stauffer and Marguerita Choy)

GM, Ford cutting more North American production due to chip shortage

By David Shepardson and Ankit Ajmera

WASHINGTON (Reuters) -General Motors Co and Ford Motor Co both said on Thursday they will cut more vehicle production due to a semiconductor chip shortage that has roiled the global automotive industry.

The White House plans a summit on the chip shortage issue next Monday that is expected to include GM Chief Executive Mary Barra and Ford Chief Executive Jim Farley and top technology firm executives.

A U.S. auto industry group this week urged the government to help and warned that a global semiconductor shortage could result in 1.28 million fewer vehicles built this year and disrupt production for another six months.

President Joe Biden wants at least $50 billion to help boost U.S. semiconductor production, but that will not address short-term needs. “This is something that there is a great deal of focus at the highest level across government,” White House spokeswoman Jen Psaki said.

The largest U.S. automaker said it will cut production for two weeks at its Spring Hill assembly plant that makes popular SUVs starting on Monday, and cut a week of Chevrolet Blazer production at its Ramos plant in Mexico and its Lansing Delta Township factory in Michigan.

GM’s Lansing Grand River Assembly will extend its downtime through the week of April 26, while its CAMI Assembly (Canada) and Fairfax Assembly plants will extend production shutdowns through the week of May 10.

Ford, the second-largest U.S automaker, said it will cancel production next week at its Chicago Assembly Plant, its Flat Rock Assembly Plant and part of its Kansas City Assembly Plant. It will also operate its Ohio Assembly Plant on a reduced schedule.

Ford said it will operate more plants this summer during traditional shutdown weeks to make up for lost production.

GM said the latest cuts have been factored into its forecast that the shortage could reduce this year’s profit by up to $2 billion.

GM said it has not taken downtime or reduced shifts at any of its more profitable full-size truck or full-size SUV plants due to the shortage.

(Reporting by David Shepardson in Washington and Ankit Ajmera in Bengaluru; Editing by Maju Samuel and Sriraj Kalluvila)

GM extends vehicle production cuts due to global chip shortage

By Ben Klayman

DETROIT (Reuters) – General Motors Co said on Tuesday it was extending production cuts at three North American plants until at least mid-March due to the global semiconductor chip shortage, while vehicles at two other factories would only be partially built.

GM, whose shares dipped 1.5% after the announcement, did not disclose the impact volumes or say which supplier and vehicle parts were affected by the chip shortage.

But it said it would focus on keeping production running at plants building its highest-profit vehicles: full-size pickup trucks and SUVs. GM said it intended to make up as much lost production as possible once the shortage chip eased.

“Semiconductor supply remains an issue that is facing the entire industry,” GM spokesman David Barnas said. “GM’s plan is to leverage every available semiconductor to build and ship our most popular and in-demand products.”

GM said it was extending downtime at its U.S. plant in Fairfax, Kansas; its Canadian factory in Ingersoll, Ontario; and its Mexican facility in San Luis Petosi until mid-March when it would reassess the situation, he said.

In addition, GM would build but leave incomplete for final assembly vehicles at Wentzville, Missouri, and its Mexican plant at Ramos Arizpe.

GM vehicles affected by the idled plants include the Chevrolet Malibu sedan, Cadillac XT4 SUV, Chevy Equinox, and GMC Terrain SUVs. Vehicles to be left incomplete for now included the Chevy Colorado, GMC Canyon pickups and Chevy Blazer SUV.

This week, GM had said it was idling the three factories where it has now extended downtime and said it would halve production at a plant in South Korea.

The shortage stems from a confluence of factors as auto manufacturers, which shut plants for two months during the COVID-19 pandemic last year, compete against the sprawling consumer electronics industry for chip supplies.

Consumers have stocked up on laptops, gaming consoles and other electronic products during the pandemic, leading to tight chip supplies. They have also bought more cars than industry officials expected last spring, further straining supplies.

The chip shortage has affected many automakers, including Toyota, Volkswagen, Stellantis, Ford Motor Co, Renault, Subaru, Nissan, Honda and Mazda.

Asian chipmakers are rushing to boost production but say the supply gap will take many months to plug. German chipmaker Infineon said the shortage would worsen in the near term. The chip shortage is expected to cut global output in the first quarter by more than 670,000 vehicles and last into the third quarter, IHS Markit said.

AutoForecast Solutions on Tuesday updated its estimate for lost production this year, saying the global industry could lose almost 1.3 million vehicles. GM could lose an estimated 111,450 vehicles, the forecasting firm said.

Honda and Nissan said on Tuesday they would sell 250,000 fewer cars in total this financial year due to the chip shortage.

Ford said last week the shortage was hitting production of its highly profitable F-150 pickup trucks, saying it could lose 10% to 20% of planned first-quarter vehicle production and earnings could fall by $1 billion to $2.5 billion.

Stellantis said it would idle its Canadian minivan plant in Windsor, Ontario, for three weeks until the end of February.

Taiwan, home to the world’s largest contract chip maker, Taiwan Semiconductor Manufacturing Co Ltd (TSMC), is at the center of efforts to resolve the shortage. U.S. officials discussed the issue with their Taiwanese counterparts last week.

Chinese officials said on Tuesday they had met with auto and chip companies, asking them to help ease the shortage. French state officials meet with auto and electronics industry leaders on Wednesday to discuss the issue.

(Reporting by Ben Klayman in Detroit; Editing by Chizu Nomiyama and Jonathan Oatis)