By on March 28, 2011

A shortage of engine-related micro control units (MCUs) resulting from damage to Japan’s Renesas Electronics plant in Naka will curtail global auto production, says the market intelligence service ICSIS, citing a report by Germany’s Deutsche Bank. Renesas Electronics is the world’s biggest maker of automotive microcontrollers. It more and more emerges as a “key bottleneck in Japan’s parts shortage,” says Automotive News [sub]. One of its two auto-related factories damaged by this month’s earthquake won’t be operational until July.

Renesas supplies 18-20 percent of the world’s automotive MCU market. About 70 percent of the production is sold to Japanese automakers, the remaining 30 percent goes to US and European car companies. “The supply of these MCUs is not easily replaceable,” says ICSIS, “as boosting production at other sites could take as long as six to nine months.”

Renesas has only recently turned the lights back on at its Naka plant in the disaster zone. Engineers are now assessing damage to clean rooms and wafer fabrication lines.

Deutsche Bank estimates that 12 percent of the U.S. Big Three production is affected by the MCU disruption. In a worst-case scenario, global auto production of around 76m units last year could be reduced by 7.5 million to 11 million units, or 10-14 percent, say the bankers.

If Renesas is a bottleneck, power shortages are a huge barrier. As reported two days ago, car companies are thinking about rotating rationing. According to a report by Automotive News [sub], the electronic industries don’t want to be left behind and demand rotating production holidays between the automotive and electronics industries. This, or an overall reduction in electricity use in exchange for a minimal but steady supply, are seen as the likely options by the Japan Automobile Manufacturers Association, says Automotive News. In summer, Japan is estimated to be battling a power shortfall of 25 percent. Whatever option will be taken, power consumption and thereby production will be curtailed sharply for a long time.

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16 Comments on “Parts Paralysis: A Shuttered Chip Plant Could Cost Up To 11 Million Cars Worldwide...”


  • avatar
    Steven02

    Would be great to know which makes and models are specifically effected by this.  Going to make for some interesting logistical problems solving for all auto makers.

  • avatar
    Jimal

    Might this be an opportunity to move some of this production that is for domestic consumption (at least) back to the U.S.? I don’t see these shortages being a short-term issue.

    • 0 avatar
      HoldenSSVSE

      In a similar line of speculation; if these delays go from weeks to months, and become further hampered by a lack of electricity, water, or fuels then Japanese manufacturers will have to look to other producers to keep production going (and not just for MCUs).  So what happens when those jobs get outsourced out of necessity – do they ever come back?

      Ironically the earthquake and rebuilding effort with strengthen the Yen as their currency flows back into Japan, making the manufacturers even less competitive in the global markets and making outsourcing to places like, well North America due to a weak US dollar and available trained workers and tax breaks, very attractive.

    • 0 avatar
      OldandSlow

      The manufacturing jobs can be outsourced to places like Indonesia, Malaysia or Thailand won’t be returning to Japan.

    • 0 avatar
      th009

      Opening an entire new plant takes years, though, so it’s not a short-term solution.  Unless an existing plant can’t be rebuilt at all, it’ll still be the quickest alternative.

    • 0 avatar
      Jimal

      Considering how comprehensive the destruction is in regions of Japan, starting with a clean slate in the U.S. might be quicker than putting something back together after the clean up.

  • avatar
    th009

    Actually the affected plant makes 18-20% of the world MCU production; Renesas in total has over 40% market share.
     
    Even if we knew which automakers (and models!) use Renesas MCUs, we don’t know which ones are made at this plant, and which of those could possibly be made at another Renesas plant (at the cost of reducing the production of another MCU type).
     
    It’ll be a serious problem for many manufacturers, for sure.  There are no alternate suppliers, and redesigning for a different MCU won’t be feasible in most cases (a few cars might have an alternate system).
     
    Note that Renesas components are also widely used in mobile phones — it will be interesting to see whether mobile phone manufacturers will be affected as well.

    • 0 avatar
      th009

      The latest info from Renesas is that they will restart the Naka plant in July. 
      http://www.ytwhw.com/NYSE/2011/0326/Renesas-To-Restart-Ibaraki-Plant-In-July.html

      So a rough calculation: 75M cars x 20% x 4/12 months = 5M car shortage, maybe 3.5M of those Japanese cars.

    • 0 avatar
      OldandSlow

      Summer sounds about right for some of these suppliers.  Except, for the German owned paint manufacturer that is shut down and located 30 miles from Fukushima reactors.

    • 0 avatar
      th009

      Switching paint manufacturers is fairly easy.  MCUs, not so much.

  • avatar
    John Horner

    Many moons ago most companies avoided single sourcing of critical components. In recent years engineering and purchasing departments seemed to stop worrying about just the kind of scenario which is now playing out.
     
    Ooops.
     

  • avatar
    John Horner

    I wonder what technology those MCUs were manufactured on? Microcontrollers are not usually built on bleeding edge wafer fab technology, so I’m sure people are scrambling to figure out if the parts can be brought online in a different fab. But, even if that is feasible it will take months to transfer production.
     

  • avatar
    golden2husky

    <<<Many moons ago most companies avoided single sourcing of critical components. In recent years engineering and purchasing departments seemed to stop worrying about just the kind of scenario which is now playing out.>>>

    Nobody want to worry about that and this is the result.  In many of the facilities that I am responsible for managing, I was always worried about what would happen when that fancy Carrier chiller that just replaced the old D/B unit experienced a circuit board failure.  The old units were simple relay controlled machines that could be fixed with a voltmeter and a Grainger catalog.   Not so the new machines.  Yep, they are more efficient to be sure, but unless you have a modular setup with redundancy, a non-serviceable board takes your facility offline.  Many of my buildings are 1900 to 1940s construction and often there is not room for enough redundant equipment.  So, you stock spare boards and the like, hoping you have the right parts in case of a failure.

    • 0 avatar
      Robert.Walter

      why would you want to employ the capital like that?
      wouldn’t you have a contract with UTC/Carrier requiring them to have all service parts availble locally (within say, 2h del window) w 24h availability?
      or do your facilities have unique conditions, i.e. very remote locations, etc?

  • avatar
    Robert.Walter

    btw, wouldn’t this be agood time for the chip supplier to explore taking-over or doing a jv before the business is moved anyway?

  • avatar
    PeteMoran

    @ John Horner
     
    My memory of these plants is from a few years ago, but I believe it’s more complex than Bertel’s report would indicate. These are not simple IC fabs, but assemblers/providers of complete controllers, or tested boards at least.
     
    Moving that capability would certainly be non-trivial. Vibration and temperature hardened devices like this aren’t made like regular computing devices.


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