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Chip Shortage Lambasts Europe, Supply Chains Confront New Problems

Even though the global semiconductor shortage has been going strong for about two years now, the world has failed to successfully manage the situation. Production stoppages remain relatively common within the automotive sector, with manufacturers continuing to attribute factory stalls to an inability to procure a sufficient number of chips. But the excuse seems to have evolved into a catch-all explanation for supply chain issues that continue that go beyond a single missing component.

That makes it a little hard to determine precisely how much of the ongoing production shortfalls can be pinned on semiconductors. But AutoForecast Solutions (AFS) was keen to take a whack at it and determined roughly 1.4 million vehicles have been removed from the automotive industry’s targeted output for 2022 — that’s on top of the 10.5 million units we lost in 2021. While the issue is indeed global, AFS stated that the last batch of vehicles to get the ax was predominantly from Europe.

According to Automotive News, AutoForecast Solutions identified an additional 98,900 vehicles that will never see assembly this week and all but a handful would have been coming out of Europe. Over a longer timeline, the forecast remains particularly bleak for the region as legacy manufacturers begin signaling their retreat. As an example, Volkswagen Group recently announced it would be deprioritizing the EU in favor of the United States and China — with the latter nation taking precedence.

From AN:

European factories accounted for 97,600 of the increase. So far this year, they have eliminated some 747,000 vehicles because of the global chip shortage.

Assembly plants elsewhere in the world saw relatively little chip-related disruption, however. Only about 1,300 more vehicles were axed at North American factories, while no additional cuts were reported in Asia, South America the Middle East or Africa.

End-of-year projections estimated Europe will be shy well in excess of a million cars. North America has fared better with a short of 341,300 vehicles and end-of-year projections hovering just over 500,000. Asia, which has actually been the least impacted by absentee semiconductors due to it being the world’s primary purveyor of chips, is assumed to see 420,500 fewer vehicles than planned with just 211,700 having already been culled.

Though that doesn’t include China, which is reporting smaller (and potentially less reliable) numbers. Though the alleged People’s Republic doesn’t seem to be losing volume due to missing chips so much as it is to sudden, localized declines in productivity.

China has resumed aggressive lockdowns in places like Shanghai, creating problems for parts suppliers and logistics companies operating within the region. We recently reported on how citizens are being forcibly sealed into dwellings or being carted off to quarantine camps, with those wishing to continue work having to live inside factories full-time. The Chinese Communist Party has also reinstated stringent shipping restrictions that previously delayed the exportation of goods out of the country.

These executive decisions (including similar actions taken by nations other than China) previously upended global trade and are likely to do so again — likely making an already bad situation much worse. For now, the region’s chip shortage problem appears to be minimal. China is only down by an estimated 70,000 vehicles as far as the chip shortage is concerned. However, Shanghai citizens now appear to be in open revolt with the government doubling down on restrictions to spur compliance. This could have severe ramifications for global supply chains if factories are not allowed to operate normally.

In Europe, the war in Ukraine is creating similar problems. Many companies have cut ties with Russian facilities quite literally overnight while the conflict itself creates additional issues for regional supply lines — including those pertaining to chips. If you want to do a deep dive into how all of this works, the Harvard Business Review published a piece foreshadowing how the return of Chinese lockdowns and Russo-Ukrainian might impact the market long-term.

The summary is that Ukraine supplies a lot more raw materials than you probably realize (e.g. neon gas used in semiconductor production) in addition to the stuff you’ve probably heard about, like wheat. The same is true for Russia and both nations are now restricted, albeit for very different reasons, from engaging in their usual trade. Though the resulting conditions are effectively the same for the global market, ushering in higher costs and fewer materials for practically everything.

[Image: Dan74/Shutterstock]

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