HomeNewsToyota Expects to Fall Short of Production Target Amid Chip Shortage

Toyota Expects to Fall Short of Production Target Amid Chip Shortage

by Jennifer Shea
Stephen Zenner/Getty Images

Toyota said this week that it expects to fall short of its annual production target. Why? Because it could not get enough semiconductors to speed up its production sufficiently.

The world’s largest carmaker said it will produce 700,000 cars in February, which is up from last year, but still 150,000 shy of its original goal. To meet the 9 million annual production target, the automaker would have to churn out 1 million cars in March.

What’s more, Toyota said it does not know how long the chip shortage will last. But the automaker and its competitors have had to cut back their production, thanks to pandemic-induced supply chain disruptions. (Tesla is a notable exception.)

“Hitting the 9 million mark is going to be extremely difficult,” Kazunari Kamakura, an executive at Toyota, said during an online briefing, per Reuters.

Toyota Facing Multiple Headwinds

As if the semiconductor shortage weren’t enough, Toyota also has to worry about at least two other dynamics. One is the skyrocketing semiconductor demand from consumer electronics companies. The other is the recent uptick in Omicron infections.

Toyota said Omicron was not a factor in its recent production report. But it remains a worry on the horizon, Kamakura said. COVID-19 lockdowns last year cut off supplies of parts from plants in Southeast Asia, for example. And with Omicron rampaging across the globe, more pandemic restrictions may lie in wait.

In North America, the semiconductor shortage-caused production drop will translate to a reduction of about 25,000 to 30,000 cars in February.

Semiconductor Revenue Hits New Highs

Meanwhile, semiconductor makers are raking it in these days. That’s perhaps due in part to the surplus of demand for their products.

Global semiconductor revenue jumped by 25.1 percent last year, climbing above $500 billion for the first time, according to technology research and consulting company Gartner. The revenue increase was less from increased production of semiconductors than it was from higher average selling price.

“As the global economy bounced back in 2021, shortages appeared throughout the semiconductor supply chain, particularly in the automotive industry,” Andrew Norwood, research vice president at Gartner, said in a statement. “The resulting combination of strong demand as well as logistics and raw material price increases drove semiconductors’ average selling price higher.”

“The 5G smartphone market also helped drive semiconductor revenue,” Norwood added.

Tech Republic reports that recent projections suggest the chip shortage won’t abate until later in 2023 at the earliest. Supply will continue to outpace demand in the meantime. And that means more headaches for automakers like Toyota as they seek to make up lost ground from a slow 2020.