[RahulNagaraj]

Toyota is said to have announced a slash in its worldwide production numbers, starting from September 2021. According to a media report, the Japanese carmaker will reduce its production numbers to 540,000 from 900,000 units; translating to a 40% reduction.



The reason for the reduction in worldwide production is said to be due to the shortage of semiconductor chips. While many of Toyota's rivals have already scaled down production numbers, the Japanese carmaker had until now managed to avoid doing the same. This was achieved because Toyota had built a larger stockpile of the semi-conductor as part of the company's revamp post the Fukushima earthquake & Tsunami a decade ago.

However, with the resurgence of coronavirus especially in Asia, Toyota's supplies have taken a hit forcing them to cut down production numbers. The company is said to have stated that it will make some cuts in August at a few of its plants, however, the bulk of the production cuts will happen in September at factories primarily in Asia and the USA.

Recently, Jean-Marc Chery, CEO of STMicroelectronics - a company manufacturing the semi-conductors, stated that the global chip shortage would return to normal only by early-2023, with gradual improvement expected from late-2022.

Source: BBC

Link to Team-BHP news

[SnS_12]

with the chip shortages, there will obviously be more demand than supply and hope Toyota don't push up the prices further of their hot selling vehicles in India like the Fortuner..

[Durango Dude]

The biggest chip maker in the world is Taiwan Semiconductor Co I think there must be trouble brewing between China and US over Taiwan and especially over this company...

[t2k4]

Originally Posted by RahulNagaraj

Toyota's supplies have taken a hit forcing them to cut down production numbers. The company is said to have stated that it will make some cuts in August at a few of its plants, however, the bulk of the production cuts will happen in September at factories primarily in Asia and the USA.

a few possible outcomes:

- wait for Fortuner deliveries to get longer
- the August 1 price hike that happened for Innova and spared Fortuner could circle back and cover Fortuner
- Toyota dealers could carry more chips (no pun) on their shoulders with increased wait times and would want to sell more chrome (read accessories) to hapless buyers

Maruti announced a similar production cut earlier this week.

Back in April, the chip production was disrupted by events including a plant fire in Japan and freezing weather in the southern U.S. that shuttered production lines. A drought in Taiwan, a major hub, reduced the industry’s output, as large amounts of water are used in the process.

The geo-political climate and the trade wars make a difficult situation impossible.

Overall, not a healthy sign for a recovering industrial sector.

The current Delta variant spread in Malaysia & Thailand accompanied by lengthy chip-producing factory closures seem to have precipitated the forecasted production cut.

With XUV 700 launch around the corner, I wonder if buyers are going to be greeted with a similar fate and year-long wait times with Mahindra as well.

[Ragul]

Perhaps the chip shortages and how the world is planning to overcome its dependence on China deserves a separate thread.

If you want to hear my pet conspiracy theory - China is building dams in Tibet to satisfy the huge water requirement needed to manufacture Chips. It is part of the grand scheme of other things which include moves to corner lithium supplies from South America for unlimited supply if power packs for mobile war machines and raw material resources from Afghanistan to feed their upcoming chip manufacturing industry. Once the dams are ready China will Invade Taiwan and then transplant its chip factories wholesale back to the plains to Tibet. 50 years later we are going to see the rise of a massive AI systems fueled war with rival countries handicapped and strangled and blackmailed by a chip shortage that China denies them much like the scenario in Terminator with Skynet war machine.

[dust-n-bones]

Volkswagen follows suit.
Volkswagen Cuts Output at Biggest Plant as Chip Shortage Bites

[norhog]

Excuse me for such a basic question, but why is this happening?
Why this chip shortage?

So, we don't have any chip manufacturer in Europe or USA who can fill in these place within a short time? They seem to be technologically advanced.

Lastly, somewhat farfetched but can our Indian defense PSUS, take this opportunity and supply the chips?

[anjan_c2007]

A new chip manufacturing unit with a sizeable production to break even at the earliest possible is very capital intensive. Silicon is the main ingredient with gallium also needed though, but a chip manufacturing unit will need a minimum investment of at least USD $ 5-6 billion.

There is good news however that Tatas have taken the lead to manufacture chips in India according to a very recent announcement by Mr T. Chandrasekeran, Chairman, Tata Group.

https://www.business-standard.com/ar...1801517_1.html

And the government has offered to assist:-

https://www.business-standard.com/ar...2000106_1.html

Being the fifth largest automaker in the world its primitive for India not to manufacture chips indigenously and depend fully on imports from uncertain sources since all these past years. The government needs to be proactive to offer initial tax holidays and incentives so that the local manufacturing begins soon. In due course, India needs to aim at exporting chips to earn foreign exchange from this much in demand component. Perhaps, had the chip shortage and the resultant production cuts not surfaced, we would have continued to rely fully on imported chips from the outside suppliers eternally.

[AZT]

Originally Posted by norhog

Why this chip shortage?

2 or 3 companies in the world control the bulk of Chip manufacturing so it’s a highly monopolised industry, to put things in perspective Joe Biden recently announced $25 billion for a chip factory to open there.

At the peak of covid, these companies over corrected and stopped all production. This was partly because orders dried up the world over and chip cos themselves didn’t except such a quick demand renounce in the developed nations. US and China in particular and also some European nations led demand here. Now I’m guessing, by the time they again went to full production they already had such a backlog of orders that it’s gonna be 2022 mid before the shortage normalises or turns into a glut. These companies also have different agreements with every company so some companies always get preference, same as in every business.

Regarding why there is such a monopoly could be a simple case of Intellectual property. Even the US factory being planned is an extension of the one in Taiwan so not a new entrant just an existing one increasing capacity / diversifying.

[vredesbyrd]

I can actually see the Fortuner hitting 70L in foresight and used ones from 2016 going for about 20L (wait, most of them are close to that mark).

[Stribog]

Originally Posted by norhog

Excuse me for such a basic question, but why is this happening?
Why this chip shortage?

So, we don't have any chip manufacturer in Europe or USA who can fill in these place within a short time? They seem to be technologically advanced.

Lastly, somewhat farfetched but can our Indian defense PSUS, take this opportunity and supply the chips?

It is just a gigantic mess of gargantuan proportions.

1- The First wave of Covid imposed lockdowns impacted factories in Taiwan and China, who shut down production lines, this lead to a huge backlog

2- Automakers who usually indent orders 6-9 months ahead of production, actually cancelled chip orders because they predicted a longer recovery time for the auto industry, which in most cases, including India turned out to be more V shaped and has been sharp

3- Most of these chips are shipped out by sea freight, and....you guessed it, ports were shut for months on end.

3a- The above has caused a HUGE container availability issue (space / equipment) and also pushed up prices massively, like Shanghai to Baltimore was $ 2,500-3,000 pre covid for a Twenty foot unit. It is now pushing $ 27,000.

4- Natural disasters (aside from COVID).

4a - One fire in One plant in a Japanese chipmaker (which supplies about 30% of the global auto needs) put production out of whack for 3 full months.

https://asia.nikkei.com/Business/Tec...ant-this-month

4b - Contrary to perceptions that the US does not manufacture chips, fully 15% of it comes from the US, a large chunk of it from plants in Texas. Well, Texas was hit with severe and freak snow storms in Feb, and this caused a huge power outage which then forced the state of Texas to order a halt to chip manufacturing in as many as 4 different plants (owned by global chip majors like Samsung and NXP Semiconductors. Samsung which is the largest chip manufacturer in the world produces 28% from plants located in the city of Austin. This was taken out by a week iirc.

Then you have the China US trade war under Trump, though this came much before, this impacted the supply of consumer product chips from China, and US companies switched orders to Samsung and TSMC (Taiwan), who switched lines from Auto chips to Consumer chips, and were in the process of adding capacity when Covid hit.

Why doesn't India or xyz country simply plonk more?

Well the cutting edge chips made by the likes of Samsung and TSMC require a CAPEX of $ 10-20 Bn! That is Rs 70,000 cr - 1,50,000 cr for ONE PLANT.

It requires a huge amount of crystal clear water and power (Taiwan in the midst of a crippling drought actually diverted water to chip plants from its fields). While power can be managed, water?

Interesting read on Taiwan, rain and droughts.

https://www.bbc.com/news/world-asia-56798308

Just one company, TSMC uses the equivalent of 80 olympic swimming pools of water EVERY DAY. Granted they recycle some 40% of this, but that then simply drives up power usage.

The GOI has been pushing PLI's and all that but these industries need land, power, water and access to a port for quick exports.

Can we provide all this in scale? I doubt it.

[norhog]

Wow!!
Really nice explanation there.STRIBOG.

So there is a lot of catching up to do for India, what with making electronic microprocessors (chips).

Thank you.

[turbojet7]

Originally Posted by norhog

Excuse me for such a basic question, but why is this happening?
Why this chip shortage?

So, we don't have any chip manufacturer in Europe or USA who can fill in these place within a short time? They seem to be technologically advanced.

Lastly, somewhat farfetched but can our Indian defense PSUS, take this opportunity and supply the chips?

Consider the scenario of PSUs taking this oppurtunity and supplying chips as next to impossible. We don't have the technological know-how to match the other industry leaders even if we plan to burn some 10 billion dollars for the manufacturing plant and associated costs.

The most advanced semiconductor chips that we make is that of 180nm(Transistor size) scale at ISRO SCL lab in Chandigarh. The current industry leading figures is 6nm-10nm. Only Samsung, TSMC, Global Foundries('Big 3' chip fabrication companies) has the know-how to churn out finger nail sized chips containing millions of these unbelievably minute transistors. Other chip designers like Infineon, NXP, Qualcomm etc. only design the chip circuitry and transfer these designs to the 'Big 3' for final production. This is because of the insanely humongous costs to sustain chip making fabs. Even upgrading from one generation to another, say from 180nm to 120nm, requires years of R&D, technological know-how, huge amount of cash and more importantly highly skilled workforce.

Compared to these companies, we are still at 180 nm which was relevant in 1998-2000 timeframe.

[Venkatesh]

Toyota cuts global vehicle production plan for November by 15% due to ongoing chip shortages, but indicated it would ramp up production from December by sticking to its latest full-year production target.

The total reduction in production from September through November will be as much as 910,000 vehicles

Source