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A shortage of chips has reduced to the production of cars.
Dream time
Taiwan Semiconductor Manufacturing, one of the companies best positioned to know the prospects for the slump that is hitting the automotive industry, had good news and bad news this week.
CC Wei, CEO, CC Wei, at a conference held on Thursday to discuss the quarterly results of Taiwan Semi (ticker: TSM), said the shortage has worsened due to the snowstorm and icy temperatures that Texas in February and ‘the factory disruption in Japan’ apparently a reference to a fire that hit a large chip factory there last month. Chips of many kinds could generally remain scarce until 2022, he said.
The good news, however, is that Taiwan Semi in particular is seeing the situation for car chips largely resolved by the end of the third quarter. “Together with our productivity improvement, we expect the shortage of semiconductor auto parts to significantly decrease for TSMC’s customers by next quarter,” the CEO said.
Both
Ford Motor
(F) and General Motors (GM), along with many other automakers, have stopped production at some plants while waiting for parts. Both Ford and GM have already said that the shortage of chips will be a billion-dollar headwind for 2021 profits.
The end of the scarcity deficit in the third quarter will be better than continuing it in 2022, but it could still mean car companies changing their financial forecasts, despite having their earnings in the first quarter in the coming weeks report. Many investors expected the deficit to resolve itself in the first half of the year.
And the language Wei used in April was sharper than he said in January when the company reported figures in the fourth quarter. “We are currently seeing that there is a shortage of the car that offers the mature technology offering,” Wei said at the time. “And we work with the customer to reduce the shortfall impact.”
The mature technologies are essentially less sophisticated semiconductors. The pandemic, the recovery of the car sales of the pandemic, problems with the construction of new semiconductor technologies in the industry and a strong demand for things like 5G phones and high performance computers, all contributed to the current car situation.
In the long run, Taiwan Semi is planning a major increase in capital spending to meet the growing demand and ensure that the deficit does not recur.
Car investors do not seem to be deeply concerned. Shares in Ford and GM fell by about 2% this week, while the
S&P 500
and Dow Jones Industrial Average both rose slightly more than 1%.
Still, Ford and GM’s shares are both about 40% higher. The shortage of semiconductors at this stage remains a side issue for investors.
Write to Al Root at [email protected]