Fire at Japanese chipmaker adds to collapsing microchip supply lines for automakers

A fire at a semiconductor factory of one of the world’s leading auto chip manufacturers has caused concern for automakers that have already slashed production due to the ongoing semiconductor shortage.

The fire on Friday, March 19, took place at a clean room in a factory owned by a subsidiary of Renesas Electronics Corp. According to Renesas, the fire started due to the heat from an electrical problem inside a single piece of equipment. The company confirmed that two-thirds of the affected production lines were making automotive chips.

Effects of fire to be felt in a month

Renesas CEO Hidetoshi Shibata said that the fire’s impact on the global supply of chips would be significant. He said that the company was trying to make up for the lost production at other plants but wasn’t sure whether that was possible. The company estimated that the loss of revenue was the equivalent of $160 million a month.

The incident is expected to contribute to the ongoing semiconductor shortage that has affected multiple industries, including automakers. The latter have been suffering from an unexpected strong comeback in demand after the coronavirus (COVID-19) pandemic hit last year. Car factories are unable to ramp up production because of the semiconductor shortage.

In February, the Ford Motor Co. stated that it expected to cut its output by up to 20 percent in the first quarter of the year. This will cost the company about $1 billion to $2.5 billion in pretax profit.

Meanwhile, the Renesas fire is expected to directly impact the production of companies such as Toyota, Volkswagen and Continental. In addition, BMW, Daimler and Stellantis could also be negatively affected by the fire.

A spokeswoman for Toyota, the world’s largest automaker, said that it was currently assessing the situation.

According to Renesas, automakers will start to feel a supply pinch from the fire in about a month. According to Renesas Executive Vice President Masahiko Nozaki, the company had inventory to maintain shipments for only a month.

Shibata confirmed that the company along with its key suppliers were already looking for ways to minimize the impact of the fire. That said, he confirmed that Renesas may not be able to replace all the destroyed equipment within a month. This means that a return to full production could take longer.

Effects of shortage go beyond the auto industry

The fire at Renesas’ plant is expected to have a significant negative impact on the semiconductor shortage. Prior to the fire, the company had actually brought back to Japan some of the production it had outsourced to Taiwan Semiconductor Manufacturing Co. (TSMC) in an attempt to meet customer demand more quickly.

TSMC has been facing issues trying to ramp up production, partly because of the severe drought in Taiwan.

Even without the fire, the semiconductor shortage was already affecting companies outside of the auto industry.

Samsung, which makes chips for other companies on top of its own products, has called the crisis “very serious” and stated that it poses a problem for the company coming into the second quarter.

The supply issues are serious enough that the company is rumored to be skipping the launch of its Galaxy Note tablet later this year. Samsung’s smartphone rival Apple, on the other hand, has already confirmed that the launches of its new high-end iPhones were on hold due to shortages of components

Meanwhile, electronics and gaming giant Sony said last week that it would not be able to fully meet demand for its new PlayStation 5 console in 2021 due to the shortage.

Follow Glitch.news for more on the ongoing global semiconductor shortage.

Sources include:

ZeroHedge.com

WSJ.com

Reuters.com