Malaysia's chip supply disruption: Japanese car companies cut output by 1 mil

Toyota has confirmed with Japan’s Nikkei that disruption in semiconductor chips supply from Malaysia is the reason why it has cut its planned annual production volume by 300,000 units, or 3 percent of its planned 9.3 million cars target.

In total Nikkei, says six Japan’s biggest car makers – Toyota, Honda, Nissan, Suzuki, Mitsubishi, and Mazda – have announced cuts totaling 1 million cars.

Suzuki is the hardest hit, slashing 10 percent (350,000 cars) of its planned annual output. Suzuki plants in India, the Japanese compact car specialist’s largest market, are now operating only at 40 percent capacity, reports the Japanese business daily.

Toyota officials told Nikkei that the cuts are due to shortage of semiconductor parts from Malaysia’s STMicroelectronics plant in Johor. STMicroelectronics supplies automotive microcontrollers to Toyota suppliers, who in turn make brake components for Toyota.

Nikkei says STMicroelectronics is sitting on an 18-month backlog of orders and is unable to fulfill the demand because factory operations continue to be disrupted by Covid-19.

Another plant affected is the Infineon Technologies’s plant in Melaka, which makes semiconductor parts that goes into steering and brake components but the plant has been shut down for 20 days in the five-week period since June.

Apart from Japanese manufacturers, CEOs of Volkswagen and Daimler have also singled out Malaysia as the cause for disruptions in their supply chain.

Also read: Amidst global criticism, Malaysia gets to work fulfilling backlog orders for chips

Last week, Daimler CEO Ola Källenius told German publication Automobilwoche "With the plant closings at semiconductor suppliers in Malaysia and elsewhere, the challenge has now become even greater, so that our sales in the third quarter will probably be noticeably below the second quarter."

Volkswagen’s CEO Herbert Diess told CNN “It has gotten worse already. We expected that we would have relief after the summer break, which didn't happen because in Malaysia, we had really quite significant problems with Covid. Some of our suppliers, the back ends of our suppliers are mostly based in Malaysia, and three plants were hit hard.”