The past three years have not been easy for the auto industry, which has piled up the effects of the international situation crisis after crisis. The pandemic put a deep brake on the economy, forcing production adjustments and, as a first step, manufacturers reduced orders for semiconductors commonly used in modern vehicles. “To get an idea, [antes] a more conventional car would have around 120 to 150 semiconductors and today there are easily more than 300,” contextualizes Hugo Barbosa, communications director at Renault Portugal. of an essential component in several industries, namely information technology.
At the same time as the industry moderated demand, successive lockdowns and the covid-19 impetus for the digital transition caused consumption of technology equipment to skyrocket, from computers to graphics cards, from storage to communications. “When the auto industry wanted to return to a normal pace, there was no production capacity available from semiconductor manufacturers,” said Sylvain Derivry, a specialist in the market and partner from Deloitte Portugal. The consequence was a necessary adjustment of the assembly lines, with the reduction of production, the introduction of redundancies and the adjustment of the finished products.
Portugal is affected
Strategies were different and often adapted to the context. Some brands chose to cut back on in-vehicle equipment, such as cell phone inductive chargers, touchscreens, or larger ones, but there were even brands that returned manual windows to their offerings. The most important thing was to keep producing so as not to exacerbate the impact of the crisis. “The industry decided to reinvent itself. When we ran out of parts, the cars were finished because it was concluded that it would be cheaper to complete them in a second phase than to completely stop production,” explains Hugo Barbosa from. Pressure from consumers and delivery times left no alternative – it should be remembered that the waiting time for a new car has exceeded 12 months and remains high, ranging from four to nine months depending on the manufacturer.
The consequences were also felt on national territory. At Autoeuropa, in Palmela, production was interrupted on several occasions, a situation repeated at Stellantis, in Mangualde, where Peugeot, Citroën and Opel vehicles depart. The largest disturbances mainly occurred in 2021, with some stabilization this year. “The global semiconductor crisis affected the activity of the Stellantis plant in Mangualde, which led to the application of the dismissal and the suspension of the start of an additional shift planned for May,” explains Jorge Magalhães. However, the communications director emphasizes that “in the second half of 2022, production was not affected by this situation”.
Renault Cacia, in the district of Aveiro, mainly produces gearboxes, oil pumps and other components that are not equally affected by the effects of the shortage of semiconductors. Still, Hugo Barbosa acknowledges the slowdown in the assembly lines because “we couldn’t sell the production anywhere” – everything produced in Cacia is destined for export, putting the company in the top 15 of the main national exporters. In the same group with more sales abroad is the German Bosch, which develops and produces multimedia solutions and sensors for cars from Braga. An official source does not specify the impact of the crisis on the business, although it guarantees that this is “a situation that not even Bosch can escape” and that efforts are being made to “keep the impact as low as possible”.
careful navigation
The outlook for the evolution of the situation in the coming year is divided between moderate optimism and the caution that has been called for over the past three years. From the privileged point of view of an analyst like Sylvain Derivry, the data appears to indicate the beginning of a return to normality. “I believe we can be more optimistic and see the end of this crisis from mid-2023,” he anticipates, justifying the combination of two factors that he considers important. On the one hand, the Deloitte expert considers a general increase in semiconductor production capacity worldwide as “expected”, on the other hand, he predicts a drop in demand in connection with the threat of an economic recession. Gabriel Coimbra, leader of IDC Portugal, paints a similar picture for the next 12 months, adding that the global semiconductor market should see total sales growth of 4.4% and an increase of 4.7% in the automotive segment.
However, he warns that the estimates refer to “income and not number” of units produced, though he is confident in “greater availability of components” that will return to balance the market. “In the long run, semiconductors are a critical part of our economy, which is becoming increasingly technological,” he emphasizes.
On the auto industry side, precaution is key when it comes to forecasting. Renault Cacia recalls that in addition to the shortage of chips, the impact of the war in Ukraine on the supply of wiring and, above all, the increase in raw material costs, the sector is “in the midst of a necessary transition to electric mobility with colossal” that cannot be missed in this comparison. Hugo Barbosa nevertheless says that there has been “a positive evolution in recent months” and that “it can improve in 2023”, but argues that it is “premature to talk about the end of the crisis”.
Stellantis, on the other hand, does not expect “stabilization until the end of this year”, says Jorge Magalhães, underlining the fragility of supply chains in which “any incident can affect production more”. The situation is expected to remain “very complicated until the end of 2023”. The Association of Manufacturers of the Automotive Industry (AFIA), which represents manufacturers and suppliers, believes that next year the shortage of semiconductors will not be resolved and that, if all goes well, Portuguese companies will only be able to “returning to 2019 numbers”.
Reindustrialize Europe
Solving the microchip shortage involves a well-defined strategy, but one that is complex to execute. For this mission, the brands are committed to in-house production of these components to reduce their dependence on suppliers – Renault is building a semiconductor unit in northern France and Bosch is expanding two factories in Germany. Bosch is one of the few automotive suppliers in the world that also produces semiconductors.
On the political front, the European Commission is working on the European Chips Act, a €43 billion support framework to “ensure future competitiveness and maintain its technological leadership and security of supply”, the official portal of the community body reads. The main goal is to double the market share in semiconductor production from about 10% to 20% by 2030, supporting the sector and following in the footsteps of the United States, which launched support in the order of 52 billion .
In this effort to reindustrialize Europe, intensified by the impact of the pandemic and supply chain disruptions, Portugal could play an important role if some structural challenges are addressed. “Portugal has excellent conditions for reindustrialization, but I doubt that this process will be carried out within the scope of the automotive industry,” says Jorge Couto, justifying this with what he considers a logistical disadvantage of the national territory. The distance from European production centers is exacerbated by the inadequacy of the railway line, factors that weigh on profit margins and, he believes, could drive the industry out. However, he emphasizes that “there are conditions attached [nacionais] in terms of research and development capacity, the quality of companies, managers and their technical skills”. AFIA guarantees that 98% of cars made in Europe “have at least one part made in Portugal” and that the “concern is know if we will maintain this presence in the constructors for years to come”.
The European strategy to reduce dependence on the North American and Asian markets is, according to Gabriel Coimbra, a “medium and long term” plan that will not solve “the immediate problem of the lack of components”. While agreeing with IDC’s leader, Sylvain Derivry warns that the doubling of European market share will have to accompany the growth of the semiconductor market, “which should double by 2030”, so “we will have to quadruple our production” . to represent 20% of the world total”. What is certain is that, the analyst says, the effects will not be felt until “around 2026 or 2027”. Until then, the auto industry will have to bite into a bumpy ride with semiconductor shortages .
Source: DN
