Japan’s Rohm Co said that vital semiconductors for automobiles and industrial machinery are likely to remain in short supply at least throughout next year, adding to ominous warnings about further fallout from the global chip crisis.
The Kyoto-based chipmaker, whose clients include Toyota Motor Corp, Ford Motor Co and Honda Motor Co, has been hampered by a severe shortage of key materials, as well as full production lines, Rohm CEO Isao Matsumoto said.
The company started beefing up its capacity in September last year and plans to spend another ￥70 billion (US$636 million) this fiscal year, but the full contribution from such investments would not be seen immediately because production machinery is taking longer to arrive, he added.
Photo: Bloomberg
“All of our production facilities have been running at their full capacity since September last year, but orders from customers are overwhelming,” Matsumoto said in an interview this week. “I don’t think we can fulfill all the backlog of orders next year.”
It joins peers like Infineon Technologies AG in warning that supply chain struggles are likely to persist for far longer than previously anticipated. Chip delivery times have already surpassed 20 weeks, as the Delta variant of SARS-CoV-2 complicates efforts to resume normal operations from Japan to Southeast Asia.
Material and component shortages, compounded by jammed trains, ships and planes, have forced global automakers from Toyota to Volkswagen AG to cut or suspend production in recent weeks. The Japanese auto giant last week said that it would temporarily halt production at 14 plants.
Founded more than 60 years ago, Rohm has become an integral part of the automotive supply chain, as automakers add more electronics and semiconductors to vehicles. The Japanese manufacturer’s automotive solutions include devices used for power management, air-conditioning, lighting and entertainment.
The most severe bottleneck is a lack of materials like those required to make leadframes — the metal structure inside a semiconductor unit that communicate signals with the outside of the package.
“Offers to hike prices won’t do a job at all anymore, because our suppliers just don’t have a unit of stock at hand,” Matsumoto said
The shortages might benefit the bottom line.
“Rohm’s operating profit margin may widen as its planned capacity expansion could bode well for sales and profit growth, as well as overseas market share gains, amid looming global chip shortages,” Bloomberg Intelligence’s Masahiro Wakasugi and Ian Ma wrote in a research note this month.
Still, some analysts said that a sudden drop in demand might eventually follow, as beefed up production lines start contributing to capacity and customers finish securing enough inventories.
“The current crunch is stemming from suppliers’ lack of output and makers trying to buy more components than what they need due to concerns,” Morningstar’s head of equity research Kazunori Ito said. “Both should go away in 2023 or so.”
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