Tuesday, November 30, 2021

Blaze at Japan chip factory piles on the woes for major carmakers worldwide

After the fire, shares in the chip manufacturer fell along with its clients, including Toyota, Nissan and Honda.

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One of the car industry’s biggest computer chip suppliers is warning that a major fire at one of its factories in Japan could have a “massive impact” on its ability to fulfil desperately needed international orders.

This comes at a time when supplies of chips to the auto industry are already running short, causing problems for major carmakers as modern vehicles include dozens of microprocessors.

Shares in the affected semiconductors firm Renesas fell, along with its clients including Toyota, Nissan and Honda.

The Naka, Ibaraki province, plant specialises in very thin wafers, making it one of the company’s most advanced facilities.

Renesas has said the blaze occurred last Friday and the exact cause is still being investigated. It took fire fighters more than five hours to put out. The firm has said no staff were injured but 11 of its manufacturing equipment units were damaged.

Because the blaze was in an environmentally controlled area designed to avoid dust contaminating the chips, restarting production will involve more than just replacing the ruined machinery.

Renesas said the majority of the products manufactured using the affected machines could be manufactured elsewhere, but the wider supply shortfall will make that difficult to achieve.

The company has said it hopes to restart production in a month, but Nikkei Asia is saying it could take three months before output is back to normal.

Renesas has said that it has about a one-month stockpile of chips to continue fulfilling automakers’ orders – so the impact on car production will not be immediate.

At the start of the pandemic, carmakers cut orders for the components because of a slump in vehicle sales.

However, when the market rebounded towards the end of 2020, they found it hard to source supplies because other consumer electronics makers had stepped in with orders of their own to meet higher than normal demand for their gadgets because of lockdowns.

February’s freezing weather in Texas closed chip-making plants there, and a drought in Taiwan is threatening production there.

US trade restrictions on telecoms firm Huawei and chip-maker SMIC have caused Chinese companies to stockpile their own supplies.

Many carmakers have slowed or temporarily halted production at some of their plants.

Nikkei Asia reported on Sunday that the price of memory chips had risen 60% since the start of 2021.

And last week, Samsung’s co-chief executive Koh Dong-jin warned of a “serious imbalance in supply and demand of chips in the IT sector globally”.

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