Chip shortage, Honda North America will start shutting down this week, is a "production halt wave" coming to the automotive industry?

A geopolitical dispute surrounding basic chips is evolving into a global supply chain crisis for automobile production.

On Monday, Honda announced it would cut production capacity at its assembly plant in Alliston, Ontario, by half, which is responsible for producing the Civic sedan and CR-V SUV.

According to local union president Vito Beato, the production cut will last until Wednesday, with a shutdown starting Thursday for a week, and then resuming half of the production later next week.

Global Times reported that earlier this month, the Dutch government implemented an operational freeze on the Chinese-funded Wingtech's subsidiary Nexperia, citing "economic security," and suspended Chinese control. This series of actions attempts to appropriate the capital and technological achievements that Chinese companies have invested in for years, which many have dubbed the "pirate plunder" of the 21st century, causing an uproar in international public opinion.

This has led to a chip inventory crisis for some automakers and suppliers, which may run out in the coming days. Analysts warn that due to the widespread application of these basic chips in numerous vehicle components, this issue may not be easily resolved through temporary procurement of substitutes.

Basic Chips Difficult to Replace Quickly

Although Nexperia does not produce cutting-edge semiconductors, the widespread use of these basic chips in automobiles complicates the search for alternative supplies.

Volvo CEO H. Samuelsson stated:

These are not very strategic components, but there are hundreds of small microprocessors distributed throughout the car lock systems, air conditioning controls, speedometers, and more.

Unlike the semiconductor crisis a few years ago caused by the pandemic, fires at Japanese suppliers, and severe storms in the U.S., automotive executives say this situation cannot be simply resolved by temporarily procuring substitute chips and adjusting production plans. Samuelsson pointed out:

This is not a problem we can solve within our control.

Data shows that Nexperia's revenue was approximately $2 billion last year, with about 60% coming from the automotive industry.

Impact May Spread to Other Industries

The threat of production disruptions is rapidly becoming a reality and has already triggered a chain reaction within the industry.

Ford COO Kumar Galhotra warned:

A very swift resolution (to the basic chip supply chain issue) is needed to avoid production losses in the fourth quarter, which concerns not only us but the entire industry.

Bosch, one of the world's largest automotive suppliers, also stated that the company is preparing to adjust production plans at a German factory, but has not yet begun implementation. EU Trade Commissioner Maros Sefcovic stated:

Restoring and securing the semiconductor supply chain is crucial for Europe and our global partners.

Barclays analysts noted in a report this week that while many suppliers believe there are alternatives for basic chips, the issue lies in limited inventory. Most suppliers typically hold only two to three weeks of inventory. The report stated:

The chip shortage could impact automotive suppliers as early as this week. If the stagnation of the basic chip supply chain continues, the impact may spread beyond the automotive industry.

The German Mechanical Engineering Industry Association (VDMA) stated that the production halt could affect manufacturers of other products such as generators, construction machinery, and agricultural machinery