The Chinese industry ministry has committed to increasing production of semiconductors to meet with the high global demand created by the transition towards electric vehicles as well as increased demand for electrical products during the pandemic.
Automated robot welders
Photo: Fleetwood Metal Industries
Global semiconductor demand has far outstripped supply due to the greater proportion of the world working from home, which means a number of manufacturers have been saving their supplies solely for electronics companies.
This has resulted in short supply for the automotive industry, which has had to scale back production for the first half of the year, hindering plans to roll out a greater number of EV brands to meet the climate goals laid out by European governments.
Read more: Semiconductor shortage causes major automakers to cut production
The Chinese ministry of industry and information technology (MIIT) will support domestic and foreign companies to increase investment and continue to develop the production of integrated circuits, according to ministry spokesperson Huang Libin.
Volkswagen previously announced a slash in production numbers by as much as 100,000 units across Europe, North America and China, with Nissan and Honda also reducing output for at least the first half of the year.
Countries such as the UK and Portugal have proposed complete bans on full-petrol or diesel vehicles within the next decade or so in order to massively reduce their carbon footprints.
Analysts as Goldman Sachs told ArgusMedia: "We believe semiconductor supply shortages could take two to four quarters to fully resolve, although some chip shortages may be alleviated more quickly.
"Semiconductors take about a quarter to manufacture and equipment lead times can stretch to one or two quarters."
Taiwan Semiconductor Manufacturing (TSMC), currently the world's largest chipmaker, is working with automakers as its "top priority."
TSMC CEO CC Wei said: "The automotive market has been soft since 2018. We only began to see a sudden recovery in the fourth quarter. However, the automotive supply chain is long and complex, where many of our technology nodes have been tight throughout 2020 due to strong demand from our other customers."
The semiconductor shortages have hit come companies particularly hard.
Volkswagen is looking to work with suppliers to claim for damages owing to lost production in the wake of these shortages.
Read more: VW looks to claim damages over semiconductor shortage
Nissan, which has also been hit with semiconductor shortages, has used Brexit as an opportunity to shift its supplies of batteries to their facility in Sunderland, England, as a way of getting around short supply from Asia.
This will keep the company in line with a clause of the EU deal that means automakers must get their batteries from within the EU or UK, or face heavy tariffs.
However, production shortages due to chip shortages are still a problem, but the company may be able to bounce back faster owing to these changes.
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