Toyota has warned that its profits may fall by a fifth over 2022 due to increasing energy costs and raw material prices following the various supply chain disruptions of the past two years.

Paul Kirkpatrick, partner at Browne Jacobson, knows how the shortage of semiconductor chips will impact the automotive industry and hit all parts of the manufacturing industry. He told Manufacturing Digital more.

Paul Kirkpatrick, partner at Browne Jacobson

Semiconductor supply chain disruption and the automotive industry

“The well-documented shortage of semiconductor chips has had a significant impact on the automotive industry.

“Projections that suggest that the shortage may be resolved in the second half of this year seem optimistic, and may be at odds with previous market intelligence, which anticipates that the shortage would continue throughout the course of this year, and possibly even into next year.

“Figures published by the Society of Motor Manufacturers and Traders (SMMT) as recently as 5th May 2022, demonstrate that the impact of that shortage is continuing to be felt in the market, as new car sales fell by -15.8% in April. The principal reason for this significant drop was thought to be the ongoing global supply chain shortage, and in particular the limited availability of semiconductors, which is continuing to significantly restrict the production of new vehicles. In light of the ongoing supply chain difficulties within the industry amongst other factors, the SMMT decided to lower its 2022 market outlook for new cars expected to be registered from 1.89mn to 1.72mn.”

The semiconductor shortage is a challenge for manufacturing and the automotive industry

“In those circumstances, whilst we also expect that the severity of the semiconductor shortages might ease later in the year, we question whether those challenges will be resolved in the very near future. If this does prove to be the case though, this will certainly be welcomed by the industry as a whole.

“To sound one further note of caution - even should the shortage of semiconductors begin to ease throughout the second half of this year, a range of wider market factors (which to date have been somewhat overshadowed by the shortage of semiconductors) will continue to make the market a challenging environment for businesses. 

“The rising cost of energy, rapidly climbing inflation, a wider supply chain and raw material crisis, and the uncertainty surrounding the impact of the war in Ukraine, will all continue to play a part.

“Nevertheless, the automotive industry has proven to be a greatly resilient place in the last few years.”