Like many businesses in the manufacturing sector, we are experiencing supply chain issues with some components, in particular engines and parts supplied by overseas OEMs (original equipment manufacturers). Many of our suppliers vastly reduced their production line capacity through the early part of the pandemic, and that reduced capacity is still feeding through the system affecting many OEMs during 2021.
Whilst the national vaccination program is going well, many countries in our supply chain are behind the UK in vaccinating their populations. We source parts from EU countries, North America and Asia, and the global supply chain is proving slow to recover.
We would like to reassure customers that everything possible is being done to expedite the supply of new equipment but would ask for your continued patience as the recovery continues. Our sales and support teams will always keep you informed of unavoidable extensions to lead times and we now have a better understanding of the possible delays.
A Global Shortage of Semiconductors
A key reason for recent supply chain issues is the global shortage of microchips used in electronic components. Semiconductors are the “brain” in every electronic device and a key component in the manufacture of engines. The slow-down in production during the pandemic, coupled with a huge rise in demand from the tech sector, means the supply of semiconductors has reached a crisis point. For example, vehicle manufacturers such as Ford and Nissan have recently been forced to halt production at some plants due to the shortage of chips.
The boom in tech products during the pandemic has increased competition for a reduced number of chips between OEMs and the big tech companies. Car manufacturers also underestimated the demand for vehicles in the second quarter of 2020, which has further fuelled demand for a diminished number of microchips. Add to this the rising cost of silicon due to the mass production of the COVID-19 vaccines and you have what some would call a perfect storm.
While the global OEM industry buys about $37bn worth of microchips annually, with Nissan alone spending £4bn a year, this is outstripped by tech companies. Worldwide semiconductor sales increased by 6.5% in 2020 and it is claimed that shortages in the car industry are a result of the big players being outbid for diminishing stocks by the tech giants, who are also accused of inventory hoarding along chip production chains.
The knock-on effect is amplified for smaller manufacturers, with delays in supply and production, along with rising prices that they do not want to pass on to consumers. Whilst we maintain strong relationships with our suppliers, and source vehicles, engines and components from across the industry, the shortage of micro-chips has an impact on virtually every aspect of our manufacturing process.
Some believe the shortage could last until 2023, though many experts expect the OEMs to reach full capacity again towards the latter part of this year. As a business, we are currently experiencing an average 10-12 week delay on certain engines and other parts from overseas and will keep you informed of any changes to this schedule.
Thanks again for your patience.