Renesas fire exacerbates chip shortage for auto industry

March 26, 2021 // By Christoph Hammerschmidt
Renesas fire exacerbates chip shortage for auto industry
A fire recently broke out at Renesas' semiconductor factory in Naka, Japan. As a result, a clean room and seven chip manufacturing machines were damaged. The outage will affect chip production for months to come. The incident further exacerbates the shortage of electronic components in the auto industry that has been going on for months.

After the fire, Renesas CEO Hidetosi Shibata assured that everything would be done to resume production as soon as possible. However, due to the severity of the damage and the complexity of the semiconductor production process, it will take several months before production returns to normal levels, as the wafers already in the plant are likely to be lost due to fire-related contamination, and experts say it takes more than ten weeks to produce a new chip. The affected fab produces semiconductor circuits on 300-mm wafers. Chips worth about $160 million are produced there every month. Two-thirds of these are destined for the car industry. According to Bloomberg, the Naka fab's output normally adds up to 6% of the auto industry's global chip demand.

But normal conditions have not prevailed in this industry for some time - many carmakers have had to cut production because they cannot get enough semiconductors for their cars. Most recently, Volvo reported production restrictions; before that, bottlenecks at Ford, Mercedes and repeatedly at Volkswagen had also become known. The reason lies in massive shifts in production in the wake of the Corona pandemic: when car sales plummeted almost a year ago because of the pandemic, semiconductor manufacturers filled their production pipelines with orders from other industries. These now have to be processed before normal conditions can be restored.

The fire at Renesas has also had a particularly serious impact because there had already been production stoppages elsewhere in the semiconductor industry: Infineon had stopped a production line there due to the drastic onset of winter in Texas. In the meantime, however, this plant has been restarted. The logistics concept of the car industry also plays an important role. In Europe, the industry relies almost entirely on the just-in-time principle - in order to save expensive storage capacity, parts are delivered as close as possible to the time when the vehicles are actually built. As can be seen now, with this principle, the supply chain breaks even with comparatively small irregularities. Even before the fire, Renesas CEO Hidetosi Shibata had told the news agency Bloomberg that the supply shortage in the automotive industry would last at least until the middle of the year. Now it looks like an improvement will not come until well into the second half of the year.


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