As we’ve noted before, the chip shortage is causing problems for manufacturers of all sorts, not just auto and electronics manufacturers. The Wall Street Journal (subscription) recently examined the widespread effects of this supply crunch.
What’s going on: “Big users of chips—including automobile, smartphone and appliance manufacturers—are also major buyers of other materials, such as paint and glass. As production of finished goods falls because of the chip shortage, those companies are also cutting purchases of many other components, executives of supplier companies said.”
- “3M Co., Axalta Coating Systems Ltd., and Corning Inc. said this week that their sales are suffering because of the semiconductor shortage, as major customers produced fewer vehicles, washing machines and devices.”
- “Companies that provide services to manufacturers, like water-management company Ecolab Inc. and train operator Union Pacific Corp. are also being affected.”
The reason: During the pandemic, consumer appetite for electronics and other goods containing the parts picked up faster than expected. A Japanese factory fire and cold weather in Texas that temporarily shuttered production worsened the situation. Meanwhile, stepping up production capacity can take years.
Potential bright spot: “United States Steel Corp. said Friday that some of its car customers are planning to increase production rates over the next six months, starting as soon as November. ‘We are delighted to hear from multiple auto customers who are foreshadowing that the trough of the chip shortage could be behind us,’ CEO David Burritt said.