Global chip drought hits Apple, BMW, Ford

The global chip shortage is going from bad to worse with automakers on three continents joining tech

giants Apple Inc. and Samsung Electronics Co. in flagging production cuts and lost revenue from the crisis.

In a dizzying 12-hour stretch, Honda Motor Co. said it will halt production at three plants in Japan; BMW AG cut shifts at factories in Germany and England; and Ford Motor Co. reduced its full-year earnings forecast due to the scarcity of chips it sees extending into next year. Caterpillar Inc. later flagged it may be unable to meet demand for machinery used by the construction and mining industries.

Now, the very companies that benefited from surging demand for phones, laptops and electronics during the pandemic that caused the chip shortage, are feeling the pinch. After a blockbuster second quarter, Apple chief financial officer Luca Maestri warned supply constraints are crimping sales of ipads and Macs, two products that performed well during lockdowns. Maestri said this will knock US$3 billion to US$4 billion off revenue during the fiscal third quarter.

“It’s a fight out there and you have to be in daily contact with your suppliers. You need to make sure that you’re important to them,” Nokia Oyj chief executive Pekka Lundmark said Thursday on Bloomberg Television. “When there is a shortage in the market, it is things like how important you are in the big picture, how strong your relationships are and how you manage expectations.”

Meanwhile, companies that supply chips are reporting surging sales and pledging to invest billions to expand capacity as they struggle to keep up with demand. Qualcomm Inc., the world’s largest smartphone chipmaker, said demand for handsets is surging back as life returns to normal in some markets.

Stmicroelectronics NV, a key chip supplier for carmakers, said profit for its auto and power unit jumped 280 per cent in the first quarter. CEO Jean-marc Chery credited a surprise rebound in demand as well as the industry’s adoption of digital features that require more chips for the latest wave of constraints.

Samsung, which is both a producer and user of chips, said Thursday that component shortages will contribute to a slide in revenue and profit this quarter at its mobile division, which produces its marquee Galaxy smartphones.

The shortfall of critically needed semiconductors has forced the entire auto industry to cut output, leaving thin inventories at dealerships just as consumers emerge from COVID-19 lockdowns. In just the past week, Jaguar Land Rover Automotive Plc, Volvo Group and Mitsubishi Motors Corp. have joined the list of manufacturers idling factories.