window.googletag = window.googletag || {cmd: []}; googletag.cmd = googletag.cmd || []; googletag.cmd.push(function() { googletag.defineSlot('/22557728108/my_article_breadcrumb_above_pc', [ 728, 90 ], 'div-gpt-ad-1685524554756-0').addService(googletag.pubads()); googletag.pubads().enableSingleRequest(); googletag.pubads().collapseEmptyDivs(); googletag.enableServices(); });
googletag.cmd.push(function() { googletag.display('div-gpt-ad-1685524554756-0'); });

After MCO, chip supply shortage is slowing car production in Malaysia

Hans · Jan 21, 2021 05:02 PM

After MCO, chip supply shortage is slowing car production in Malaysia 01

Just when you thought the car industry can get some respite after MITI’s corrective U-turn to allow automotive manufacturing to resume as the whole of Malaysia except for Sarawak goes back into MCO mode, we have been told by our friends working in the manufacturing sector that the much talked about worldwide shortage of semiconductor chips has hit Malaysia, threatening to halt production lines once more.

After MCO, chip supply shortage is slowing car production in Malaysia 02

Not all manufacturers are facing the problem yet but we understand that several major local manufacturers including Proton are already scaling down production due to shortage of electronic components.

window.googletag = window.googletag || {cmd: []}; googletag.cmd = googletag.cmd || []; googletag.cmd.push(function() { googletag.defineSlot('/22557728108/my_article_fourthp_under_pc', [ 728, 90 ], 'div-gpt-ad-1685525140735-0').addService(googletag.pubads()); googletag.pubads().enableSingleRequest(); googletag.pubads().collapseEmptyDivs(); googletag.enableServices(); });
googletag.cmd.push(function() { googletag.display('div-gpt-ad-1685525140735-0'); });

After MCO, chip supply shortage is slowing car production in Malaysia 01

So if you are waiting for your Proton X50, sorry this is going to delay things further but like MCO, this is a problem faced by every manufacturer and there is nothing that Proton can do about it.

The worldwide shortage of chips has already idled plants across all major automotive manufacturing capitals.

After MCO, chip supply shortage is slowing car production in Malaysia 02

In December alone, Volkswagen lost nearly 10,000 cars in production in China due to the global chip supply shortage. Toyota too has been forced to idle its plant in Guangzhou for almost two weeks before resuming earlier this week. Honda too is cutting production in China, which is ironic because a lot of the chips are sourced from China.

In Europe, Audi is putting nearly 10,000 staff on furlough as it cuts working hours at its main plants Ingolstadt and Neckarsulm.

After MCO, chip supply shortage is slowing car production in Malaysia 03

Daimler too has cut back on production at Rastatt in Germany and Kecskemet in Hungary – its two main plants for its popular compact cars range (A-Class, CLA, GLA, and GLB).

Volkswagen too is doing the same at Emden, which mainly makes the Passat and Arteon, and Wolfsburg, which makes the Golf and Tiguan.

After MCO, chip supply shortage is slowing car production in Malaysia 04

Over in Japan, Nissan is cutting production at its Oppama plant, which production targets for the recently launched Note by a third, from 15,000 to 5,000 units per month.

Other domestic manufacturing plants by Toyota, Honda, Subaru, and Mazda are also expected to scale down their production.

After MCO, chip supply shortage is slowing car production in Malaysia 05

The shortage in supply is also driving up prices of chips, further exasperating the situation.

What’s causing the chip supply shortage?

The Covid-19 pandemic has forced many to work from home, thus increasing demand for laptops and other home office gadgets.

After MCO, chip supply shortage is slowing car production in Malaysia 06

Demand for laptops and gaming consoles have increased faster than chip supply can resume post-lockdown

As cinemas, pubs, and outdoor activities are limited in many countries including Malaysia, demand for gaming consoles, TVs and other home entertainment products also increased.

When China recovered from the initial wave of Covid-19 and lifted its lockdown, demand for various consumer products especially cars increased rapidly.

After MCO, chip supply shortage is slowing car production in Malaysia 07

Meanwhile, manufacturing activities in other countries especially those in South East Asia, could still not operate at full capacity, so supply of other critical materials remained short.

China, Taiwan, South Korea, and Japan account for the majority of world’s supply of semiconductor chips.  

Automotive electronics is the fourth largest sector for the semiconductor industry, after data processing, communications, and consumer electronics.

After MCO, chip supply shortage is slowing car production in Malaysia 08

Continental Automotive, a major supplier of automotive electronics told Germany’s Deutsche World:

"After the industry shut down in the early phase of the crisis and the resulting abrupt drop in demand, automobile manufacturers across all regions increased their production volumes much faster than expected by market experts. This resulted in large scale supply shortages for semiconductors.

After MCO, chip supply shortage is slowing car production in Malaysia 09

Source: IHS, Deloitte

Like all manufacturing industries including automotive, the semiconductor industry relies on forecasted figures to plan their production, with ample lead time to coordinate the logistics of procuring materials from all over the world.

"With lead times of six to nine months, the semiconductor industry has not been able to scale up fast enough to meet this unexpected growth in automotive demand," Continental said, attributing the problem to the overbooking at silicon foundries from other industries like consumer electronics.

After MCO, chip supply shortage is slowing car production in Malaysia 10

Why chips are needed in cars?

Today’s cars are very reliant on electronics. It’s hard to put an estimate on how many electronic parts are there in an average car because most of these parts are installed either as a sub-assembly or a module, each made up of many more sub-modules.

After MCO, chip supply shortage is slowing car production in Malaysia 11

According to a study by Deloitte, it is estimated that automotive electronics make up to 40 percent of a car’s cost.

Even the cheapest Perodua Axia requires a fairly high number of electronics – engine management, fuel injection, transmission control, braking control (ABS), instrument panel, airbag control modules, radio, body control (door locks, alarm, power windows), modules for the LED tail lights, reverse sensors, it’s a long list.

After MCO, chip supply shortage is slowing car production in Malaysia 12

Remember than higher range variants of the Axia now comes with autonomous emergency braking (AEB, or as Perodua calls it ASA 2.0). This requires electronic controls for the brakes and a high precision stereoscopic camera.

And we haven’t even get to higher range cars that come with more advanced driving aids, those with fancier infotainment screens, digital instrument panel, multi-zone automatic air-conditioning, Head-up Display, semi-autonomous driving capability.

How badly will Malaysian car industry be affected?

We are now only at the beginning of the problem. Some manufacturers still have a fair number of 2020 manufacturing year cars but those who have sold out their allocation before 31-December 2020, the original deadline for SST-exemption for CKD cars, will have a tougher time putting together 2021 cars.

After MCO, chip supply shortage is slowing car production in Malaysia 13

“Yes we have to scale down our production due to the shortage. It’s difficult to tell when we will be able to secure new supplies but the bigger problem for us is still the very fluid Covid-19 situation. If we cannot register our new cars with JPJ, then it doesn’t make any difference if we can produce the cars or not,” said a source familiar with the matter.

Checks by WapCar.my revealed that, similar to MCO 1.0, the government’s direction on whether businesses can remain open or not is interpreted differently in different places.

After MCO, chip supply shortage is slowing car production in Malaysia 14

Some dealers told us that their local city councils don’t allow them to open their showrooms.

It’s the same with JPJ offices. The services offered and counters opened differ from city to city, and in some locations, dealers are unable to get their customers’ road tax and Vehicle Ownership Certificate (VOC, formerly known as ‘registration card’) printed.

Without a VOC, their customers’ car loan applications cannot be completed.

So while the chip supply shortage is quickly shaping up to be a problem for manufacturing plants, as a whole, the Covid-19 situation and restrictions due to MCO poses a bigger problem to car companies (and consumers waiting for their cars).

Hans

Head of Content

Over 15 years of experience in automotive, from product planning, to market research, to print and digital media. Garages a 6-cylinder manual RWD but buses to work.

window.googletag = window.googletag || {cmd: []}; googletag.cmd = googletag.cmd || []; googletag.cmd.push(function() { googletag.defineSlot('/22557728108/my_article_relatedmodel_above_pc', [ 728, 90 ], 'div-gpt-ad-1685525247138-0').addService(googletag.pubads()); googletag.pubads().enableSingleRequest(); googletag.pubads().collapseEmptyDivs(); googletag.enableServices(); });
googletag.cmd.push(function() { googletag.display('div-gpt-ad-1685525247138-0'); });
window._taboola = window._taboola || []; _taboola.push({ mode: 'thumbnails-a-2x2-stream', container: 'taboola-below-article-thumbnails', placement: 'Below Article Thumbnails', target_type: 'mix' });

Trending Discussion

Hassle-free purchasing, get your next car fast!

2022 Perodua Alza 1.5 X

Upgrade

Add your car

Not trading-in?   Sell your car