Seeing ‘Light at the End of the Tunnel,’ Automakers Perceive Easing of Chip Shortages

Autonomous robots assemble an X model SUV at the BMW manufacturing facility in Greer, South Carolina on Nov. 4, 2019. REUTERS/Charles Mostoller

The global semiconductor shortage that has plagued the auto industry for around two years might be easing in the short term.

Carmakers like BMW AG, Mercedes Benz AG, and Daimler Truck Holding AG, who have experienced production outages for several months in recent times, are now getting enough semiconductors to manufacture at full capacity, according to Bloomberg.

“We’re still monitoring it week to week, but up to now basically worldwide, we had no issues running production,” Joerg Burzer, Mercedes’s head of production and supply-chain management, told the outlet. Supply issues occur “here and there … but nothing compared to what it was like last year.”

According to BMW, all its plants are running and the company is yet to see any production halts due to chip shortages. At present, the situation is “a bit more stable,” a spokesperson said. The firm is monitoring chip supply on a daily basis and warns about the possibility of new disruptions emerging in the coming weeks or months.

Volkswagen is also seeing a steady chip supply at present but is uncertain about it in the near future. Harry Wolters, president of Paccar Inc.’s DAF Trucks unit, also told Bloomberg that the supply situation is better than what they had anticipated five or six weeks ago. As a result, they have been able to “increase build rates” in the United States and Europe.

South Korea’s top carmaker Hyundai Motor Corp. has raised its production target for June. While in April, the company produced 322,767 units, up from 285,133 units in January, the company is now aiming for 350,000 units in June. Hyundai has a global order backlog of around 1.3 million cars.

“Hyundai and other automakers apparently see light at the end of the tunnel in this round of the global chip shortage,” an industry official said to KED Global. “Also, demand is not bad despite the protracted disruptions to car production.”

Despite reports of an easing semiconductor supply situation among some automakers, a complete recovery in chip supplies might still take several months.

Qualcomm CEO Cristiano Amon sees the chip shortage waning by late 2022 to early 2023, according to Fox Business. Some companies might not see supply chain issues from the shortage soften until 2024, he added.

Amon also stressed the need to increase U.S. production of semiconductors. The White House had warned about “escalating vulnerabilities” due to the semiconductor shortage.

In 1990, the United States accounted for almost 40 percent of global semiconductor fabrication, which has now fallen to just 12 percent. “This is becoming a national security issue, and unless we reverse it now, it’s only going to become worse,” Amon said to Fox Business. “China is heavily invested in their production; we’re in a race.”