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10 Jun 2021

Econ Digest

Auto chip shortage…Automakers adjust plans to slow down production of over 44,000 vehicles in Thailand


         Since the end of 2020, the global automotive industry has continued to experience chip shortages, mainly stemming from the structural vulnerability of the automotive chip manufacturing industry. Multiple reasons for fluctuation in chip supply and demand have added to the shortage, including COVID-19 outbreaks, massive increase in chip inventory by major Chinese electronics makers ahead of US sanctions, and a fire at a chip-making plant in Japan, which led to an auto chip shortage. While the situation should begin to ease temporarily in the 2nd half of 2021, structural solutions for the automotive chip supply chain remains a key challenge for automakers over the long term.

         As for Thailand, the country’s auto industry, consisting primarily of Japanese automakers, has been constrained by a tight supply of chips from the end of 2020 to the 1st quarter of this year. Because Thailand uses the Japanese chip supply chain that specializes in automotive chips and has close ties with Japanese automakers, production plans and chip inventories can be adjusted quickly; however, a fire that occurred at Japanese chip plant will likely cause a slowdown in Thailand’s auto production in the 2nd quarter of 2021. Despite this, the chip shortage in Thailand may gradually ease in the 3rd quarter of 2021 after the chip factory recovers from the fire. KResearch estimates that the chip crunch in Thailand will likely result in adjustments to the 2021 auto production plan and the delay of about 44,000 vehicles, but the slowdown is unlikely to affect this year’s production, which is forecasted at 1.8 million vehicles.

        Looking forward, KResearch believes that automakers should consider adjusting their chip supply chain by choosing more automotive chipmakers as partners to reduce dependence on other manufacturers and stabilize the overall chip supply. At the same time, automotive manufacturers may invest in chip production bases across regions where their production bases are located to reduce the risk of accidents, and adjust production plans flexibly to cope with fluctuations in demand that may vary from region to region.

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