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Renesas factory fire will result in 1.6 million fewer cars produced this quarter than planned

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With chipmaker Renesas Electronics unable to fully recover from the recent plant fire until mid-July, Japan’s largest automakers have begun to prepare for long-term disruptions and possible production cuts.

The fire followed other incidents that depleted the world’s stock of automotive electronics chips. Nomura Securities estimates that disruptions from Renesas alone could reduce global vehicle production by 1.6 million units in the second quarter, or 7% of the planned volume.

A Toyota Motor executive said inventory would run out until one of its key suppliers, Renesas, resumed deliveries. Therefore, Toyota Motor is preparing to “plan some kind of production cut.”

Nissan Motor is also considering cutting production.

“It all depends on whether we can make up for that in the second half of the fiscal year,” said a Nissan Motor executive.

According to some estimates, supply disruptions to Renesas products could last much longer than expected.

“It will be extremely difficult to completely restore production in three or four months, and companies should consider the possibility that the effect will last at least six months,” said Sanshiro Fukao, senior research fellow at Itochu Research Institute.

Recall that a fire broke out on March 19 at the Renesas plant in the city of Naka, Japan. He damaged 23 machines used in the manufacture of microcircuits. In an effort to resume production as soon as possible, the company recognizes that it will not be able to return to normal production earlier than in 100-120 days. Stocks run out much earlier, so customers should prepare for a shortage.

The fire affected the first floor of a two-story building, where 390 cars are located. Of these, 11 burned down, and 12 suffered from combustion products and fire extinguishing means. They are in need of repair and replacement. Most of the 23 damaged vehicles are expected to be replaced in April and May. However, some of them will have to be built from scratch and will not be installed until June at the earliest.

Renesas is the second largest automotive chip maker in the world after NXP Semiconductors. Any production shutdown for automakers will have a major impact on the Japanese economy, as cars account for about 15% of industrial production and 18% of exports. Renesas microcomputers are used in other products as well.

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