Opel Factory Closure in Germany... Global Automakers Rewrite Business Plans for Next Year

[Asia Economy Reporter Yujin Cho] As the semiconductor supply shortage recovery is delayed, global automakers are struggling to establish their business plans for next year. Predictions that the semiconductor supply chain crisis, which was expected to recover within this year, will not end next year make it inevitable to adjust next year's production volume and profit and loss based on risk assumptions.

According to major foreign media on the 30th (local time), German automaker Opel announced that it will close its Eisenach plant until next year due to supply chain disruptions. An Opel spokesperson said, "The prolonged COVID-19 pandemic and the extended semiconductor supply shortage have put the industry in an unprecedented situation."

Inside and outside the industry, there are mixed predictions: some optimistic that the semiconductor supply chain crisis will ease within this year, and others expecting the same level of impact as this year to continue next year. There is also a view that the crisis is transforming into a structural problem that may take several more years for full recovery.

A major variable is the recovery of the semiconductor supply chain's back-end process. The supply bottleneck is worsening as the spread of COVID-19 in the Asian region, which is a key supply area for semiconductor back-end processes, does not subside. Malaysia, which has semiconductor chip testing and packaging plants, has already suffered significant damage due to the resurgence of COVID-19.

Market research firm IHS Markit has lowered its global vehicle production forecast for next year due to supply bottlenecks in Asia, including Malaysia. Phil Armsrud, senior analyst at IHS Markit, said, "Due to the impact of COVID-19, the lead time for semiconductor back-end processes is expected to extend up to nine months." He pointed out, "Companies responsible for semiconductor testing and packaging in Southeast Asia, including Malaysia, mostly operate on low-margin business models, making it difficult to make investments to increase facility capacity."

Another factor slowing the recovery of the global supply chain is the dependence on the outdated chip called the microcontroller unit (MCU). The MCU is a core component of internal combustion engine vehicles, widely used for engines, airbags, and other vehicle functions, but facility investments have not been made for years. This is because the long-term demand outlook for MCUs is not bright due to increasing demand for advanced technologies and the paradigm shift to electric vehicles.

The WSJ reported that signs that the semiconductor supply shortage crisis has not ended will be clearly revealed in the upcoming third-quarter earnings announcements. Market experts expect that global automakers' third-quarter sales this year will sharply decline due to production disruptions caused by semiconductor shortages.

Global consulting firm AlixPartners estimated that the global automotive industry will suffer a loss of $210 billion this year due to semiconductor chip shortages. This is double the forecast made in May.

This content was produced with the assistance of AI translation services.