Japanese Parts Paralysis Reaches Toyota Europe. Strategic Chipmaker To Re-Open In June
It was only a matter of time (primarily time on the ocean) for the waves of the March 11 tsunami to reach Europe. Toyota Europe will idle production at 5 European plants for several days in late April / early May and “will run at a reduced volume during the month of May in order to manage available parts supply,” as an emailed statement from Toyota’s European headquarters in Brussels says. In the meantime, a strategically important maker of automotive microcontrollers will remain closed until June – and that’s supposed to be good news.
Toyota’s European timing is both a product of container transit times (about 5 weeks door-to-door from Japan to Europe) and public holidays in Europe. Toyota Europe will idle plants on 21 and 22 April, from 25 to 29 April, and 2 May. Because of scheduled holidays, plants in the UK, France, and Poland were scheduled to be closed on some of these days anyway.
The affected plants are Toyota Motor Manufacturing UK (TMUK) in Burnaston, Toyota Motor Manufacturing Turkey (TMMT) in Adapazari, Toyota Motor Manufacturing France (TMMF) in Onnaing, plus the engine manufacturing facilities Toyota Motor Industries Poland (TMIP) in Jelcz-Laskowice and TMUK Engine Plant in Deeside, Wales.
European Toyota finds itself in the the same quandary as its colleagues in the U.S.: “Even though most of our parts come from European suppliers, we are experiencing gaps in our supply chain due to the situation in Japan,” said Didier Leroy, President and CEO of Toyota Motor Europe (TME). If just a little something comes from Japan, a lack of that something stops production.
Shutting down for a few days doesn’t mean much. “Reduced volume for May” is more ominous. Expect volume to be reduced for much longer. Most of Toyota Japan has remained shut down for a month now, and will not re-start production in all factories before Monday, 4/18. Even then, Toyota Japan will produce at half steam. The full force of the month-long Japanese shutdown has yet to reach the overseas facilities. Reduced production in Japan will reduce overseas production well into summer.
In the better-than-really-awful-news department, strategically important chipmaker Renesas announced that they will re-open a hard-hit plant a month earlier than planned: The plant was scheduled to re-open in July, now it will re-open in June, says The Nikkei [sub].
According to The Nikkei [sub], “Renesas is the world leader for automotive microcontrollers with a global share of 30%.” A quarter of the global automotive microcontroller capacity of Renesas is concentrated on their Naka plant in northeastern Japan. The plant was severely damaged by the March 11 earthquake, and is closed.
Japan’s automakers and autoparts manufacturers were so spooked by the outage that they dispatched a small army of several hundred workers to come to the aid of Renesas. The rescue team restored water, gas and other infrastructure and helped to repair manufacturing equipment at the downed Naka plant.
The strategic importance of this manufacturer was reflected in the stock price of major Japanese automakers. Honda rose 95 yen on the news of the earlier opening, Nissan was up 20 yen, Toyota was up 45 yen today. If it is good news that an important supplier will remain closed until June, then you can imagine how dire the situation is in Japan.
It needs to be kept in mind that fab time, the time from growing a chip on a waver to final packing and shipping of the chip, typically takes six to eight weeks. Naka is what’s called a “front-end line” fab, which does the early steps of IC production. Chips started from scratch in June will ship sometime in August – if left unimpeded by power outages. This is wishful thinking. The Northeast of Japan is in the grips of rolling blackouts now, and prepares for severe power shortages in the summer months. Tokyo Electric Power Co’s output has been halved to about 31 gigawatts after the earthquake. TEPCO expects to be at 46.5 GW capacity by the end of July. If all goes well, the region will be short a quarter of its power.
At the one month anniversary of the quake, Japanese automakers already had lost production of more than half a million units, as a calculation by Hans Greimel, Automotive News’ [sub] man in Tokyo, shows. IHS Automotive projects that the quake could result in a global production loss of five million units for this year.
Japanese production lost through April 8Toyota260,000Honda58,000Nissan55,000Suzuki59,000Mazda43,000Subaru29,000Mitsubishi26,000Total lost530,000
(Data Automotive News [sub])
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Toyota isn't huge in Europe, I suspect shutdowns of their North American operations will impact them more than shutdowns of European plants. If I was a user of Renesas chips I would start qualifying a second source NOW to improve security of supply. I appreciate that this might take a few months, but it looks like the lights might be out in Japan for a while and their is no guarantee that it will be "business as usual" by Summer. I can't imagine rolling blackouts are easy to work around at a wafer fab...
I just saw a large photoset from the areas that were demolished by the earthquake and the tsunami it caused. How'd you like to deal with a large fishing vessel athwart the main street, leaning against the buildings on both sides? (to give one small example...) These areas of Japan have a long road ahead before they approach any kind of a normal existence. It's amazing to me that a chip plant would be scheduled to be online by June, and quite a testament to the Japanese people.