Tight chip supplies could linger into Q3

A shortage of auto chips could impact 672,000 units of global light vehicle production in the first quarter, data firm IHS Markit said on Wednesday, warning that the disruption could extend into the third quarter.

Automakers around the world are shutting assembly lines because of problems in the delivery of semiconductors, which have been exacerbated in some cases by the former Trump administration's actions against Chinese chip factories.

The shortage so far has impacted Volkswagen, Ford Motor Co., Subaru Corp., Toyota Motor Corp., Nissan Motor Co., Stellantis, Mazda Motor Corp. and other companies.

"Because the cause of these constraints is the result of increasing demand from OEMs and limited supply of semiconductors, it will not be resolved until both forces are aligned," said Phil Amsrud, senior principal analyst-ADAS, Semiconductors and Components, IHS Markit.

China will be the most hit in the first quarter at nearly 250,000 units, according to IHS.

AutoForecast Solutions, which tracks industry production plans, on Tuesday forecast production volume impact of 964,000 vehicles in 2021 due to semiconductor shortage.

Senate action

On Tuesday, a group of 15 U.S. senators including Majority Leader Chuck Schumer and Republican John Cornyn urged the White House to work with Congress to address the global semiconductor shortage.

The senators -- from key auto states like Michigan, Ohio, Tennessee, Wisconsin, Illinois, Indiana and South Carolina -- said in a letter to the White House warned that the "shortage threatens our post-pandemic economic recovery."

"We believe that the incoming administration can continue to play a helpful role in alleviating the worst impacts of the shortage on American workers," the senators wrote.

The senators, including auto caucus chairs Democrat Sherrod Brown and Republican Rob Portman, urged the White House "to support efforts to secure the necessary funding to swiftly implement the semiconductor-related provisions in the most recent National Defense Authorization Act, which would boost the production of semiconductor manufacturing and incent the domestic production of semiconductors in the future."

Matt Blunt, who heads the American Automotive Policy Council representing U.S. automakers, praised the senators "who recognize it is a significant challenge for the auto sector."

The White House did not immediately comment.

Taiwan, home to the world's largest contract chip maker Taiwan Semiconductor Manufacturing Co., and other major tech firms, is at the center of efforts to resolve the shortage.

Taiwanese companies have pledged to ramp up production and the government has urged them to address the problem.

Taiwan Economy Minister Wang Mei-hua will hold a virtual meeting with the U.S. at the end of this week to discuss supply chains, with semiconductor firms present, her office said last Friday.

Automakers around the world are adjusting assembly lines caused by the shortages and have cut some production, caused by manufacturing delays that some semiconductor makers blame on a faster-than expected recovery from the coronavirus pandemic.

In 2019, automotive groups accounted for roughly a tenth of the $429 billion semiconductor market, according to McKinsey.