Volkswagen Blames Chip Makers For Silicon Shortage

German car maker VW blames poor planning by chip makers as the principle reason for most car brands having to reduce factory production

German car making giant Volkswagen has stepped into the row caused by the ongoing silicon shortage, by blaming chip producers directly.

According to Reuters, Volkswagen said bad planning on the part of its suppliers compounded the chip shortage blighting the global car industry, claiming it gave ample notice that the coronavirus’ hit to car production would be limited.

It has been widely reported that the chip shortage for car makers was mostly because car makers had scaled back their silicon orders with Chinese and Taiwanese factories making the chips because of poor sales of new cars in early 2020, when the Coronavirus pandemic began to fully impact in countries around the world.

Silicon shortage

But by the end of 2020, the car industry was apparently surprised at the demand for new cars, but ordering new chips is not that easy because of the limited number of firms manufacturing the silicon.

This silicon shortage has been made worse by the increased demand for CPUs, as the world embraces home working during the Covid-19 pandemic.

This has led to increased demand for laptops and desktop PCs (most notably gaming PCs), coupled with the usual demand from the smartphone sector, plus the arrival of new gaming consoles such as the PlayStation 5.

This has meant there is now a real supply chain issue that is only set to continue in 2021.

Volkswagen concern

Volkswagen was one of the first to slow car production due to a lack of chips, and the German firm (which is the world’s second-largest carmaker) reportedly said it was made aware of the chip shortage by one of its suppliers at the end of November, but that that warning came too late.

“We have communicated our demand early on. We have passed on our forecasts which have confirmed that demand,” Reuters quoted a VW executive as saying.

“If suppliers do not trust our numbers and consult their own forecasts, we should have been informed straight away. This has not happened,” the executive reportedly said.

It should be noted that as well as identifying potential weaknesses in the automotive supply chain, the question over who is responsible for the shortages could play a decisive role in any legal disputes down the line.

The VW executive said differing demand forecasts could explain the current problem, which has led the German car maker to warn that chip supply will remain strained during the first half of 2021.

“This has caused a lot of trouble. If the supplier didn’t have a chip problem in its own supply chain, we would get our control units,” the executive said.

Other manufacturers

But it is not only VW that is experiencing difficulties sourcing the computer chips needed to make modern cars.

Daimler (which makes Mercedes), Fiat, Honda, Ford, Nissan, Subaru and Toyota all reportedly have had to suspend production for days or weeks at a time.

Audi (part of the Volkswagen group) also confirmed it was having to slow production because of the computer-chip shortage, forcing it to make 10,000 fewer cars in the first quarter of the year and putting more than 10,000 workers on furlough.

Earlier this month Mazda warned it would cut its global output by 7,000 of vehicles in February and March.

Last week General Motors confirmed it was extending its production cuts at three North American factories.

Samsung also recently warned that a global shortage in semiconductors for cars could have a knock-on effect on the memory chips used in smartphones.

Political issue

And this silicon shortage has quickly become a political issue as well, especially for Taiwan, which is home to the world’s largest contract chip maker, Taiwan Semiconductor Manufacturing Co Ltd (TSMC).

Taiwan’s Economy Minister Wang Mei-hua met with executives of major Taiwanese chipmakers last month, after Germany’s Economy Minister Peter Altmaier wrote to Wang to ask her for help in addressing the shortage.

Wang reportedly also said the United States, European Union and Japan had also been in contact.

And the silicon shortage issue was also addressed during Taiwan’s most senior meeting with US President Joe Biden’s administration, namely with US Deputy Assistant Secretary for Trade Policy and Negotiations Matt Murray.

At the weekend, the US presidential administration of Joe Biden said it is looking to take immediate action to address a global shortage of semiconductors that has forced US carmakers to temporarily slow or stop production.

That comes after US chip firms reportedly called for government help in setting up chip production factories in the United States.

Most of the world’s chips are currently made in Asia.