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January 18, 2021

Chip shortage slows Audi output

Audi has had to slow production because of a computer chip shortage it is describing as a "crisis upon a crisis", according to media reports on Monday.

By Olly Wehring

Volkswagen Group premium brand Audi has had to slow production because of a computer chip shortage it is describing as a "crisis upon a crisis", according to media reports on Monday.

Chairman Markus Duesmann said the automaker would now make 10,000 fewer cars in the first quarter of this year and putting more than 10,000 workers on furlough, the BBC reported.

Parent Volkswagen announced its own output reduction due to a lack of chips last week, alongside rivals such as Honda and Subaru.

Duesmann told the Financial Times carmakers had been caught by surprise, according to the BBC.

After a poor start to 2020 for new car sales, manufacturers cut their orders from the Chinese factories making computer chips.

But then, at the end of the year, "everybody was quite surprised by the strength of the market", Duesmann said.

However, ordering new chips is not simple.

CCS Insight analyst Geoff Blaber said: "Semiconductors have a broad range of applications but a very limited pool of companies capable of manufacturing the silicon.

"Demand is high, and supply is tight" and any sudden needs "can prove very difficult to accommodate".

"Modern cars are becoming computers on wheels, with an abundance of silicon required to control everything from the infotainment system to camera, radar and lidar," he said.

The demand from carmakers "competes for manufacturing capacity with smartphones, servers and a host of other segments", Blaber added.

A boom in the market for devices such as PCs and new game consoles was also making it doubly difficult to book manufacturing time.

The BBC noted shortages have seen Daimler, Fiat, Ford, Honda, Nissan, Subaru and Toyota all reportedly suspend production for days or weeks at a time.

Supplier Continental has described "large scale supply shortages" with lead times of six to nine months, adding bottlenecks were expected to continue "well into 2021, causing major disruptions".

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