Procurement problems have created massive delays, bottlenecks and sales slumps for businesses up and down the supply chain. This fact is a major reality for automakers, most of which lack the all-important chips that are essential for cars to operate.

The inability to procure these tiny computer chips will likely lead to a massive gap in expected deliveries for the world's largest nameplate, according to a recent filing with the Securities and Exchange Commission.

40% shortfall in 2021 production
In a forecast issued to the SEC, Toyota announced it will produce approximately 330,000 fewer motor vehicles than it anticipated in the month of October alone. Because of this, and other disruptions, the automaker expects to fall well short of its annual production target, perhaps 40% lower than its initial projections.

In the statement, Toyota pointed to the dearth of semiconductors and the ongoing COVID-19 crisis as the main reasons for diminished production.

"The spread of COVID-19 infections remains unpredictable, making it difficult to maintain operations due to lockdowns at various locations, and we are working to transfer production to other regions," Toyota said, referring to several of its factories in hard-hit countries such as Malaysia and Vietnam. As noted by Supply Chain Dive, Vietnam produces many vital parts and components for Toyota models, including wires, seats and frames. In fact, according to VnExpress International, roughly 95% of the auto parts produced in Vietnam go to out-of-country manufacturers including Toyota, Hyundai and Mazda. Around 80% are for Toyota specifically. Malaysia, meanwhile, is a worldwide leader in semiconductor manufacturing and exports. Studies estimate that close to 56% of Malaysia's manufacturing sector derives from exporting the electronics made there.

Tiny computer chips are causing large issues for automakers worldwide.Tiny computer chips are causing large issues for automakers worldwide.

The central ingredients needed to develop semiconductors were already in short supply, but the coronavirus lockdowns that are in place in these countries have compounded the procurement dilemma.

Semiconductors, which allow for electrical processes to take place, have been difficult to come by for much of the year. This is a big reason why automotive dealerships are running low on showroom inventory. Major nameplates like General Motors have been forced to shut down their factories for weeks at a time due to a lack of the materials needed for production and assembly.

Many other industries rely on semiconductors
It isn't just the auto sector that relies on semiconductors. You name the form of electronic, the products need semiconductors to work properly, from smartphones to internet of things products to data communications equipment.

Amit Nagar, a partner at Bain & Company, told Supply Chain Dive that automakers likely won't have first dibs on these semiconductors when they start to become more easily obtainable.

"The suppliers, they'll want to go to the other industries outside of automotive," Nagar warned. "The reason is because automotive is a lower-margin outlet for them versus the electronics companies."

In other words, since many more smartphones and PlayStation game consoles are sold in any given year than automobiles — all of which require semiconductor technology — there's greater economic incentive to sell to manufacturers like Apple, Samsung and Sony.

Bottom line: The procurement problem plaguing the auto industry is poised to continue for the foreseeable future.

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