Toyota to cut production by 40 per cent amid chip shortage, report
The company will produce only 500,000 units in September - 360,000 fewer than previously planned
Toyota, the world's largest automaker by sales volumes, will slash its global production for September by 40 per cent from its previous plan due to the worldwide shortage of semiconductors.
According to Reuters, the company had previously planned to produce a little under 900,000 cars in September 2021, but that figure has now been revised to about 500,000.
The move will result in a temporary production shutdown at several factories of the company.
A Toyota executive revealed that the production cuts would include 15 factories in Japan and overseas plants.
Earlier this month, Toyota said that it was facing a volatile business environment due to chip storages, rising material prices, and disruption in part supplies due to resurgence of Covid-19 cases in multiple countries.
Toyota produced 840,000 units in September 2020, as demand for automobiles started to recover from the initial effects of the pandemic. The company has fared better than other carmakers during the pandemic, thanks to its larger stockpile of chips under a business continuity plan that was adopted after the 2011 earthquake in Japan. However, a recent surge in the Covid-19 cases across Asia has hurt supply of auto parts, which is also hurting Toyota.
Last month, the company halted assembly lines at some Japanese factories, including its Tahara plant, after an increase in infections in Vietnam. Production at three factories in Thailand was also suspended in July due to parts shortage.
This month, production was halted at one assembly line in Guangzhou, China, according to Reuters.
The curtailed supply of chips in the past one year has disrupted many industries who reduced chip orders at the start of the pandemic, thinking that the demand for their products would decrease.
Subsequently, decline in chip demand led manufacturers to reduce production at their facilities. However, the demand for consumer electronics, such as smartphones, laptops and PCs, increased during the pandemic as most firms asked their employees to work from home. This led to a chip crisis, affecting many industries worldwide.
The global chip supply has also been worsened due to other factors, including a drought in Taiwan and a blaze at a semiconductor factory in Japan.
Most carmakers have been facing problems due to shortage of chips.
Earlier this year, Nissan, Ford and Honda either slowed or temporarily halted production at some of their plants. Jaguar Land Rover (JLR) also suspended production in April at its car manufacturing plants in Castle Bromwich and Halewood due to chip crisis.
I n May, IBM president Jim Whitehurst said that the global chip shortage could last until 2023 and that the tech industry was "struggling" to match supply to the demand caused by reopening of global markets. This prediction was echoed by European chipmakers Infineon and STMicroelectronics, who predicted production shortages continuing for another 18 months.
But despite issues due to Covid-19, chipmakers are looking at all possible ways to reinvigorate chip production.
Earlier this year, Intel announced a $200 billion investment in new factories across the USA and Europe, and earmarked another $3.5 billion in May to expand its 'Foveros' chip-stacking technology.
On a national scale, South Korea has been offering tax breaks to local chip manufacturers like Samsung Electronics and SK Hynix, aiming to encourage investment in R&D.