Toyota and Honda are closing US factories as perfect storm disrupts supply chains

Separately, Samsung, the world’s largest maker of smartphones, said a severe global chip shortage would hurt its business in the next quarter. The South Korean company also said it could refuse the launch of a new model of one of its most popular handsets, although it said the move was to keep it from competing with an existing handset.

The disruptions underscore how a number of forces are coming together to strain the world’s supply chains: from the pandemic-driven rise in consumer demand for technical goods to a backlog of imports in congested California ports and US factory failures caused by severe weather. The timing is especially worrying for manufacturers as the US and some other economies are starting to reopen thanks to vaccination campaigns.

“Automotive companies were initially to bear the brunt of these shortages, but have now spread to virtually all parts of the consumer electronics industry,” said Sanjeev Rana, senior analyst at investment bank CLSA in Seoul.

Semiconductors have been in short supply for months after makers of smartphones, PCs, tablets and TVs underestimated expectations during the pandemic, before picking up orders that chip makers caught unprepared.

The deficit was compounded by last month’s harsh winter weather in the central US. Samsung, also one of the world’s largest chip makers, was forced to shut down two chip factories in Austin, Texas last month. The facilities represent about 28% of Samsung’s total production, according to Citi analysts, and have remained closed on Wednesday. Dutch chip maker NXP Semiconductors NV has also scaled down work at two Austin facilities due to severe weather, although production resumed last week.

Toyota said on Wednesday that a petrochemical shortage has caused a halt in production at its Kentucky facility, where it builds the Camry and Avalon sedans and the hybrid version of its RAV4 SUV. The shortage would also lead to production cuts of the Mexican-built Tacoma pick-up truck. The company did not expect any employees to be on leave for the time being.

Honda said it would shut down production at most of its US and Canadian auto factories next week due to the combination of supply chain issues, including port backlogs that have delayed parts delivery, a lack of chips and severe weather in the industry. USA. Cold temperatures had caused pipes in some of its factories to burst, rendering them unable to get back up and running, the company said.

The shutdown will begin on March 22 at most of Honda’s five auto plants in the US and Canada and will last a week, the company said, without specifying which plants would shut down production. Honda said the duration of the shutdown may change depending on the parts supply. Workers will be paid to perform other duties in the factories, he said.

The problems are the latest in a string of recent woes for the auto industry. General engines Co.

, Ford Motor Co.

and Nissan Motor Co.

have all announced production cuts or temporary plant shutdowns due to the shortage of chips. Jammed ports in Los Angeles and Long Beach, California are a particular problem for Asian automakers importing parts used in their US factories.

Volkswagen AG

said it was related to a large backlog of unbuilt vehicles caused by both chip shortages and the Texas snowstorms. The German automaker said in response to inquiries from The Wall Street Journal that it would try to catch up on vehicle production in the second half of the year.

Meanwhile, chip manufacturers such as Taiwan Semiconductor Manufacturing Corp.

have reached production limits, with the company pouring billions of dollars into new capacity to keep up with demand.

Koh Dong-jin, Samsung’s co-CEO, told investors on Wednesday that tackling the supply and demand imbalance in chips has become a priority for staff. He said executives traveled abroad despite travel restrictions to discuss the matter with business partners.

Mr Koh also said the company is not considering launching a new Galaxy Note smartphone this year, one of the company’s most popular products, although he said such a delay would be more driven by concerns that the model would compete with a handset it was launched with. similar characteristics earlier this year

The demand for a lot of electronics exceeded expectations last year. For example, PC shipments rose by 13% last year, according to research firm IDC, the fastest growth rate in 10 years. The number of smartphone users fell 5.9%, but IDC and other companies had predicted a stronger decline earlier this year.

“When Covid-19 hit in the first half of last year, many of these manufacturers, like everyone else, thought the global economy would swell,” said Mr. Rana from CLSA. Instead, “all the expenditures intended for tourism, etc., went into these devices, and companies weren’t ready for this demand.”

Write to Sean McLain at [email protected]