Nissan: Chip shortages are affecting production more than expected

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diving letter:

  • Nissan lowered its forecast for global sales volume after semiconductor shortages and COVID-19 lockdowns in China hit production more than expected, President and CEO Makoto Uchida said in an earnings call on Nov. 9.
  • The automaker now expects to sell 3.7 million units in FY22, up from 4 million. Parts restrictions and coronavirus restrictions caused production in China to fall 23.5% to 242,000 units, offsetting increases in production elsewhere, COO Ashwani Gupta said on the second-quarter earnings call.
  • Nissan expects production to increase in the second half of FY22. Still, lockdowns in China mean that “overall production has been unstable and remains uncertain looking ahead,” Uchida said.

Dive insight:

Nissan is adopting a dual-sourcing strategy to secure more semiconductors. The automaker more than doubled shipments of a key component that caused shortages last fiscal year due to the use of alternative chips.

However, supply chain challenges are expected to remain.

“If [alternative chips and dual sourcing] I don’t think it will meet our demand,” Gupta said. “Even [in] In 2023 we will begin with supply chain challenges, driven in particular by semiconductors.”

Nissan’s suppliers continue to face higher electricity, logistics and raw material costs. The automaker is working to continue the dialogue with its suppliers to tackle challenges together “so that we can grow together,” Uchida said.

Chip shortages are expected to last through the remainder of the year and into 2023 as suppliers try to ramp up production. Automakers in particular have had to get creative as their companies continue to face production delays, with companies focused on improving and strengthening supplier relationships.

For example, General Motors and Ford are working with suppliers to increase transparency in the semiconductor supply chain. Similar to Nissan, Honda also turned to dual-sourcing earlier this year, changing its supply chain as severe flooding in Malaysia exacerbated chip shortages.

Despite production issues and chip shortages, exacerbated by lockdowns in China, Nissan remains optimistic.

“Although uncertain conditions may persist, we have taken effective steps to contain the impact of semiconductor shortages and resume production this fiscal year,” Gupta said.

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