Japan’s government and businesses are racing to bring a fire-damaged automotive chip plant back online, underscoring how important the component has become in a supply chain already under strain because of booming demand for semiconductors.
The Ministry of Economy, Trade and Industry is mobilizing to help Renesas Electronics Corp., one of the top providers of chips used in car electronics, procure equipment after a fire broke out at one of its plants Friday. The nation’s automakers, who depend on Renesas to supply semiconductors, are dispatching workers to the damaged site to help with recovery activities.
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The widespread and coordinated efforts reflect the importance of the auto sector and chips for the world’s third-largest economy. The two sectors are at the top among Japan’s export categories, with 9.6 trillion yen ($88 billion) of motor vehicles sold abroad in 2020, along with 4.1 trillion yen in chip exports. Renesas’ stoppage comes as global automakers face a shortage that’s estimated to knock 1.5 million units off of vehicle production, largely in the first half.
“The automotive industry is key in Japan, therefore any incident that impacts it has a broad effect on the economy,” said Roman Schorr, a director at Fitch Ratings. With the added variable of a chip crunch, “it’s certainly striking that so much right now hinges on one factory,” he said.
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The fire in Renesas’s factory in Ibaraki, just north of Tokyo, damaged a production line for 300mm wafers used in the automotive industry. The suppliers of major automakers generally keep somewhere between two to four months of stock, according to industry experts. For Toyota Motor Corp., one of Renesas’s biggest customers, and other car manufacturers, it’s a race against time to get the plant back online.
Japanese automaker shares fell Monday after news of the plant fire broke over the weekend. Renesas gets almost half of its revenue from the automotive market.
Hidetoshi Shibata, Renesas’s chief executive officer, said he’s pushing to resume operations at the facility within a month. At an online briefing on Sunday, he also warned that the stoppage will have a big impact on the car industry. One of the obstacles is that wafer-producing equipment is often custom-made, meaning it generally takes several months to replace.
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Kazumi Nishikawa, director of the economy ministry’s IT industry division, said the ministry plans to ask equipment makers to support Renesas and ensure that the company’s orders are given priority. “Renesas says it will do its best to target one month, so our position is to support it,” Nishikawa said.
The ministry will hold a panel meeting Wednesday to discuss chip strategies with Shibata, executives from Tokyo Electron Ltd. and Kioxia Holdings Corp., and representatives from the auto sector. The ministry is planning to provide a group including Tokyo Electron with 42 billion yen in funding as they seek to develop next-generation chips, the Nikkei newspaper reported Tuesday without attribution.
Read more: Fire and Ice Aggravate Chip Supply Headache for Car Industry
Toyota said Tuesday it dispatched workers to Renesas’s damaged facility to help. The automaker will examine on-the-ground conditions and come up with response measures, according to Toyota spokeswoman Shiori Hashimoto. Nissan Motor Co. also dispatched workers to the plant, a spokeswoman said.
The plant halt could begin to crimp auto production as soon as next month. While most expect semiconductor supply issues to be resolved in the second half, that may be at risk if the Renesas factory remains offline for an extended period.
Given the likelihood of government support and the pressure Renesas is under, the company appears committed to seeing through its one-month target, “though that may prove quite challenging,” Schorr said.
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March 23, 2021 at 05:03PM
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Chip Shortage Turns Repair of Japan Factory Into National Effort - Bloomberg
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