Japanese car production plunges amid supply chain disruptions

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Amid the global chip shortage, domestic output of Japan’s eight largest automakers in September stood at 398,075, down 49.7% from the same period last year, the highest drop in production since the 61.8% drop in May last year, according to Chinese state media. Among them, Toyota and Honda fell by more than 55%. The director of TSMC’s Japanese subsidiary said the severe shortage of automotive chips is likely to continue into next year.

Subaru public relations representative Hiroko Murakami told The Epoch Times that the Chinese Communist Party’s (CCP) virus-induced lockdowns have led to major shortages and delays in auto chips and parts. In addition, the long-term disruption of the automotive supply chain could lead to more unemployment and hamper Japan‘s economic recovery.

According to the Dai-ichi Life Research Institute, a 10% reduction in annual passenger car production in Japan could equate to a $46.8 billion loss in GDP and 44,000 job cuts.

In May last year, domestic production of Japan’s eight largest automakers fell 61.8 percent from a year earlier, hitting a record low. Since then, production has continued to recover. However, in August and September, production dropped again due to chip and component shortages. Domestic production by major automakers fell below the previous year’s level for two consecutive months.

Murakami said Subaru is currently running a business continuity plan (BCP) to maintain operations. A BCP describes how a business will continue to operate during an unplanned downtime or disaster.

The company’s main goal is to resolve the parts supply disruption, Murakami said. Although difficult, he strives to find alternative suppliers in a short period of time. As for semiconductor supply, there are really no quick fixes. Chip vendors are not chip makers, and automakers typically source chips from used and third-hand vendors, but chip sources ultimately come from the same manufacturers.

Semiconductor chip shortages are now expected to cost the global auto industry $210 billion in revenue in 2021, with no end in sight, nearly doubling its previous one, according to a September forecast from AlixPartners, an American consultancy. $110 billion projection in May.

In May, the Delta variant of the CCP virus broke out in Southeast Asian countries such as Malaysia and Vietnam, causing the supply of auto parts to stagnate. In September, AlixPartners predicted that automakers worldwide would lose 7.7 million production units in 2021, far more than its previous forecast of 3.9 million units in May.

Automakers around the world, including Ford and General Motors, had warned of massive profit cuts this year due to chip shortages. However, strong consumer demand and rising earnings from record vehicle prices offset some of the losses.

The director of TSMC’s Japanese subsidiary, Makoto Onodera, said at an automotive technology expo in Nagoya on October 27 that the global shortage of automotive semiconductors “will remain severe in 2022”.

Taiwan Semiconductor Manufacturing Co., or TSMC, is the world’s largest contract manufacturer of semiconductor chips. Its customers include Apple, Intel, Qualcomm, AMD and Nvidia.

According to Onodera, the lead time for the chips is about six months from the order date, and supply and demand remain heavy. As chip supply remains insufficient, TSMC on October 14 announced plans to build a new manufacturing facility in Japan.

After attending the U.S. Department of Commerce’s Semiconductor Video Summit on May 21, Mark Liu, executive chairman of TSMC, said automotive chip production was up 60% from last year’s levels.

However, in a September interview with Time Magazine, Liu suggested that someone in the supply chain was stockpiling chips. He said that amid the global chip shortage, more chips were being sent to factories than were left in products, meaning that “there are people who are definitely hoarding chips who know where in the supply chain”.

“We’re also learning because we didn’t have to before,” Liu said as he instructed his team to triangulate different data points to decipher which customers were really in need and which were stockpiling.

William Wang contributed to this report.

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Anne Zhang is a staff writer for The Epoch Times and focuses on China-related topics. She started writing for the Chinese language edition in 2014.

Ellen Wan

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Ellen Wan has worked for the Japanese edition of The Epoch Times since 2007.

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