Supplier Group Says American Plants Will Shut Down Within Weeks

As Ford Authority reported last week, China-owned chip maker Nexperia sent a note to suppliers and automakers recently informing them that it can no longer guarantee its ability to deliver chips - which is a huge problem given the fact that this company’s chips are critical to U.S.-based automotive production. The Ford backed lobby group known as the Alliance for Automotive Innovation (AAI) has since sounded the proverbial alarm over this newly looming chip shortage, followed by Volkswagen just a few days later. Now, a supplier group is warning that American automotive production plants could be impacted by this problem very soon.

According to Bloomberg, that supplier group is the Motor & Equipment Manufacturers Association (MEMA), the largest such association in the U.S. The group is warning that we're only around two to four weeks away from seeing the looming chip shortage having "significant impacts" on U.S. automotive plants after Chinese officials barred Nexperia from exporting those parts to other countries following a decision from the Dutch government to seize control of the company amid national security concerns.

“A handful of these chips can literally stop production of a full assembly plant,” said Steve Horaney, a senior vice president at MEMA. “There are substitutes, but probably not for everybody.” Horaney noted that the types of chips Nexperia supplies to the automotive industry use older tech that handles simpler tasks such as opening windows or activating windshield wipers - not newer units that take care of advanced features like driver-assist functions. Trouble is, not many other companies make those older chips these days.

“There’s just not that much extra capacity sitting around,” he said. “You don’t swap a semiconductor chip out like you do a nut or a bolt in an assembly.” Ford CEO Jim Farley previously stated that this looming chip shortage is a "political" issue, voicing his concerns with U.S. government officials during a visit to Washington this week. “It’s an industrywide issue,” Farley said on the automaker's Q3 earnings call with investors. “A quick breakthrough is really necessary to avoid fourth-quarter production losses for the entire industry.”