Japanese Parts Paralysis: Bad Bets With Chips

Why was Honda as much hit as Toyota by the March11 earthquake and tsunami? Doesn’t Honda have the bulk of its production outside of Japan? How could Nissan avoid most of the damage, even with an engine factory close to Fukushima?

It was a bit like a roulette game, and it involved a lot of chips. According to industry talk in Japan, Nissan had taken a large supply of ECU chips before the quake. Honda and Toyota were waiting for their just-in-time delivery. Honda and Toyota received most of their engine controller chips from one chipmaker, Renesas. Two weeks after the catastrophe, we had pointed out that Renesas and its damaged fab near the epicenter would turn into a major bottleneck. What’s more, Honda had no idea.

Honda bought its engine computers from three different companies, Keihin, Denso and Hitachi Automotive. Honda thought that it was well diversified. What Honda did not realize at first was that the chips in the controllers were all from the same company: Renesas.

“Before the quake, automakers were trying to diversify their suppliers,” writes The Nikkei [sub] today. “But the troubles at Renesas revealed that when they looked farther down the supply chain — at indirect suppliers — they had in fact actually been relying on single firms for certain components.”

Honda did not have a problem with its V6 engines, which use chips by U.S. Freescale Semiconductor. More that 80 percent of Honda’s cars volume is small and midsize cars. They usually use in-line four-cylinder engines, and it turned out than in most of their ECUs were microcontrollers supplied by Renesas.

Starting this fall, Honda will begin to use microcontrollers from other manufacturers for some of its models. What’s more there is a drive under way that seeks to standardize common parts across the Japanese industry, and microcontrollers are the ideal target. The firmware in the controllers can change, but the chips can be supplied from multiple manufacturers.