TokYO -- As a microchip shortage sends shock waves through the global car industry, one of Japan's main auto parts manufacturers says it wants to swerve the risk of becoming a manufacturing bottleneck by revamping the way it manages its supply chains.
The head of automatic transmission producer Nikkei Asia told Jatco in an interview that the company is pushing to make sure it always has enough chips and other key components by placing larger orders and signing contracts with suppliers earlier than usual.
The move comes as some in the auto industry have begun to move away from traditional ways of doing business, which have dominated production for decades and aim to minimize inventory and increase efficiency, as fallout from the coronavirus pandemic upends just-in-time methods.
What we can do right now is to communicate through our supply chain by sharing more forward-looking estimates and securing components, said Teruaki Nakatsuka, chief executive of the company, owned 75% by Nissan Motor. Jatco supplies companies including Japan Automotive and the Japanese car giant's alliance partners Mitsubishi Motors and Renault in France. Suzuki Motor is also among its customers.
Nakatsuka said Jatco has managed to make all its shipments as requested so far, but it is under pressure from setbacks such as COVID - 19 locks that have delayed supplies of components from the chip assembly and testing hub Malaysia, further up the supply chain.
The CEO said that securing components does not mean stockpiling inventories, but committing to larger orders than usual when making procurement decisions with suppliers. Jatco is also signing parts of its 2022 production plan with them a few months earlier and sharing contracts sooner than usual.
With the global economy turning to gear faster than many expected as countries lift COVID restrictions, demand for semiconductors has outstripped supply, particularly after appetite for electronic goods such as laptops and household appliances surged during the pandemic. The shortage has forced many carmakers to slash production.
Automatic transmissions use chips, although company that churn out finished vehicles need many more of them than we do, Nakatsuka said.
Toyota Motor last month told some of its suppliers to boost their chip inventory levels from three months to five, while Suzuki has asked parts makers to keep enough inventory for several months.
Over in the U.S. General Motors is saying it is bypassing the usual chip suppliers by ordering directly from chipmakers, with Ford Motor reportedly following suit
Consulting firm AlixPartners estimated in September that the chip shortage will cost the auto industry $210 billion in revenue this year, nearly double its forecast from May due to the rapid spread of delta variant and subsequent lockdowns in Malaysia.
Nakatsuka sees rays of hope as the spread of COVID slows in Japan and as a Renesas Electronics chip factory in Southeast Asia recovers from a fire earlier in the year. Aber he said that supply is still very far from what the automotive industry had expected, with carmakers themselves under much more pain than us. Looking at the automobile supply chains, including Jatco's, Nakatsuka said it remains difficult to understand to where chip manufacturers are shipping as a priority, complicating the shipment of products for the whole supply chain. This results in making an agreement for a short period of time, only about a few weeks before the shipment, he said.
Longer term, the world's biggest chipmaker told Taiwan Semiconductor Manufacturing Co. last week that it will build a chip manufacturing plant in Japan. But Nakatsuka recalled it is difficult and time-consuming for Japan to manufacture semiconductors, with added production costs due to increased labor cost.
Meanwhile, Jatco is accelerating its drive into supplying parts for electric vehicles and hybrids. The company, which will manufacture EV electric motors for the Nissan Kicks hybrid sport utility vehicles at the beginning of 2015 in Thailand, is likely to produce EV powertrains in the early 2020.
An EV powertrain comprises a motor, an inverter and a gearbox - the latter being what Jatco has strength with mechanical features, says the Chief Executive, as it has decades of experience in working closely with carmakers.
Indeed, electric powertrains are offering companies other than traditional automakers and parts suppliers a chance to break into the car industry, providing more competition for the like of Jatco. Nidec is one such newcomer. The world's largest motor manufacturer, whose products are used in everything from computers, smartphones and refrigerators, has publicly proclaimed a goal of producing 40% to 45% of EV traction motors by 2030.
Automakers will be extremely busy in the coming years, working on connected cars and other new technologies that were not indispensable when producing internal combustion engine cars, Nakatsuka said.
So Tier 1 suppliers like us can move closer to carmakers and be more responsible in basic power performance of moving, turning and stopping a car and drivability, he said.