May 18, 2022

condoritolapelicula

Half the Automotive

Chip Shortage Turns Repair of Japan Factory Into National Effort

Vehicle Shipment at Yokohama Port Ahead of Auto Companies Earnings

Photographer: Toru Hanai/Bloomberg

Japan’s government and businesses are racing to bring a fire-damaged automotive chip plant back online, underscoring how important the component has become in a supply chain already under strain because of booming demand for semiconductors.

The Ministry of Economy, Trade and Industry is mobilizing to help Renesas Electronics Corp., one of the top providers of chips used in car electronics, procure equipment after a fire broke out at one of its plants Friday. The nation’s automakers, who depend on Renesas to supply semiconductors, are dispatching workers to the damaged site to help with recovery activities.

Get on top of the electric car revolution; sign up to our Hyperdrive newsletter here

The widespread and coordinated efforts reflect the importance of the auto sector and chips for the world’s third-largest economy. The two sectors are at the top among Japan’s export categories, with 9.6 trillion yen ($88 billion) of motor vehicles sold abroad in 2020, along with 4.1 trillion yen in chip exports. Renesas’ stoppage comes as global automakers face a shortage that’s estimated to knock 1.5 million units off of vehicle production, largely in the first half.

Renesas Electronics plant fire

Renesas’s Naka plant, damaged by a fire on March 19.

Source: Renesas Electronics

“The automotive industry is key in Japan, therefore any incident that impacts it has a broad effect on the economy,” said Roman Schorr, a director at Fitch Ratings. With the added variable of a chip crunch, “it’s certainly striking that so much right now hinges on one factory,” he said.

The damaged factory accounts for 8.2% of domestic semiconductor production and around 6% of global automotive semiconductor output, raising concerns about the impact on supply chains for the domestic auto industry, Barclays analysts wrote in a note this week.

Read more: Chip Shortages Force More Cuts at North American Auto Plants

The fire in Renesas’s factory in Ibaraki, just north of Tokyo, damaged a production line for 300mm wafers used in the automotive industry. The suppliers of major automakers generally keep somewhere between two to four months of stock, according to industry experts. For Toyota Motor Corp., one of Renesas’s biggest customers, and other car manufacturers, it’s a race against time to get the plant back online.

Japanese automaker shares fell Monday after news of the plant fire broke over the weekend. Renesas gets almost half of its revenue from the automotive market.

Hidetoshi Shibata, Renesas’s chief executive officer, said he’s pushing to resume operations at the facility within a month. At an online briefing on Sunday, he also warned that the stoppage will have a big impact on the car industry. One of the obstacles is that wafer-producing equipment is often custom-made, meaning it generally takes several months to replace.

The World Is Short of Computer Chips. Here’s Why: QuickTake

Kazumi Nishikawa, director of the economy ministry’s IT industry division, said the ministry plans to ask equipment makers to support Renesas and ensure that the company’s orders are given priority. “Renesas says it will do its best to target one month, so our position is to support it,” Nishikawa said.