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Published on January 14th, 2021 | by Daniel Sherman Fernandez

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Toyota Forced To Halt Production In Guangzhou, China

Chip manufacturers favoring smartphone and tablet manufacturers.

Toyota Motor Corp has been forced to stop its vehicle production lines in the Chinese city of Guangzhou, due to a shortage of semiconductors, the Japanese car maker said on Tuesday this week as the latest case of shortages affecting production could result in as much as 30 percent reduction in new vehicles being produced in this quarter.

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Some production lines were halted Monday this week at GAC Toyota Motor Co, its joint venture with China’s GAC Group and operations might only resume in 4 to 5 days time, Toyota said, without giving any indication of the car models affected. Toyota’s factory in Texas (USA) where the Tundra pickup truck is manufactured is also facing semiconductor shortages by as much as 40 percent which is slowing production.  

The reason for this is because technology companies who produce semiconductors have been diverting their efforts to consumer electronics to fuel the new work-from-home lifestyle in almost all developed countries around the globe, leading to a semiconductor shortage in the automotive market  as highlighted by NikkeiAsia last week which is now very reliant on chips for all in car features. 

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New car buyers want more and more technology inside their cars and so cars are getting smarter and that requires additional technology to make them function for the new generation of consumers. Due to Covid-19 and the stay at home and work at home culture has been practiced, it is a time where the demand for consumer goods has never been higher.

Chipmakers favor consumer-electronics customers because their orders are larger than those of automakers whereas the annual smartphone market alone is more than 1 billion devices, compared with fewer than 100 million cars around the globe. Auto manufacturing is also a lower-margin business, leaving auto manufacturers unwilling to pay a premium for chips as prices moved up the last year.

And while the newest cars require more chips, so do the latest consumer gadgets. New generation smartphones using 5G connectivity require 40 percent more semiconductors than older 4G versions.

In the middle of last year vehicle sales rebounded more strongly than anticipated after governments (including Malaysia) released stimulus packages (Penjana for Malaysia) and public transport commuters avoided public transport and started driving.

Toyota Motor is not the only auto manufacturer affected by this chip shortage. Volkswagen, Honda, Nissan and even Jeep is having production delays due to computer parts issues.

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