Almost recovered from fire, says auto industry chipmaker

DETROIT – A fire-damaged Japanese factory that supplies many of the auto industry’s computer chips produces about 88% of what it produced before the March fire, its owner said.

Renesas Electronics Corp. announced last week that the replacement of the fire-damaged equipment arrived on May 27 and is expected to be operational by mid-June. This would allow the company to return to full production.

The March 19 Renesas fire and a global computer chip shortage shook up production schedules in the auto industry, forcing companies to cut production and allocate rare chips to higher margin models.

Production cuts have reduced the supply of new vehicles just as demand is recovering from the coronavirus pandemic, causing shortages and raising prices for new vehicles. Prices for used vehicles have reached record levels.

Ford, for example, said the shortage would cut production in half from normal levels in the second quarter. Almost all automakers have been affected, but Ford, General Motors, Nissan, Honda, Stellantis, Tesla and Volkswagen have been affected.

While near-normal production at the Renesas Naka plant is good news for the auto industry, it alone will not solve the industry’s shortage, said Phil Amsrud, senior senior analyst at IHS Markit who tracks semi- automobile drivers.

Renesas is the third-largest automotive chip maker by revenue and the largest supplier of microcontroller units, which are widely used in automobiles, Amsrud said. But it contracts the majority of automotive chip production to Taiwan Semiconductor Manufacturing Co., which is still striving to increase production, he said.

“Naka alone will not be able to fill all the hole we have in the supply chain,” Amsrud said.

It won’t be until the third quarter for the auto industry to see an improvement in output from TSMC and other chip foundries, but that won’t be enough to close a backlog, he said. Even from October to December, he said the auto industry still doesn’t have enough chips.

“We should start to see improvement, but we won’t be able to ship everything that we haven’t completed earlier,” Amsrud said.

There are up to 80 different computers in more sophisticated models that control everything from touch screens and transmissions to partially automated driver safety functions.

Automakers closed factories for about two months at the start of the pandemic last year to help prevent it from spreading. But they came back faster than expected, and by that point, chipmakers had shifted production to booming consumer electronics.

Then the Renesas fire struck. The shortage is forcing the auto industry to rethink its supply chains and perhaps abandon some just-in-time parts deliveries.


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