Chip Shortage Slashes Global Toyota Production

Toyota is experiencing some major production issues. The global semiconductor chip shortage is hindering the entire automotive industry. Used and new car prices have reached historic highs. Now one of the biggest automakers in the world will have to cut down more than 1/3 of its overall production.

Toyota’s production woes

In this photo illustration, a Toyota logo seen displayed on a smartphone and a pc screen.
A Toyota logo | Pavlo Gonchar/SOPA Images/LightRocket via Getty Images

According to The Drive, the semiconductor chip shortage has finally impacted Japanese automaker Toyota. American automaker Ford has been feeling the effects of the shortage. The blue oval brand has sold pre-orders that it will not be able to deliver on for a very long time.

In order to try and put out the fire that is the global semiconductor shortage, Toyota has slashed global production by 40%. This means producing 360,000 fewer Toyota models for September. In September, the company will also be stalling 27 production lines in 14 factories. This is the most decisive move that Toyota has made in reaction to the shortage since it began.

Toyota’s decrease in production will undoubtedly lead to a decrease in revenue. The semiconductor chip shortage has devastated other companies financially. All Toyota can do is try its best to mitigate this automotive industry crisis as the shortage continues to ravage the industry.

What is a semiconductor chip?

Semiconductors power most modern electronics. These small chips power phones, laptops, household appliances, cars, and many more electronics we use in our daily lives. Semiconductors even have medical and military applications. Semiconductor chips are silicon chips that have transistors built into them.

These semiconductors power most electronic products and the United States has become extremely reliant on them. In fact, President Joe Biden signed an executive order in February to research and address the semiconductor chip shortage because so many industries are suffering losses.

The United States accounts for a huge amount of semiconductor sales but does much less manufacturing. American companies often design the chips then need to outsource the actual production process. This lack of American semiconductor manufacturing coupled with the global pandemic has resulted in an unprecedented chip shortage.

How long will the chip shortage last?

Semiconductors on a table in a factory.
Semiconductors in Germany | Jens Schlueter via Getty Images

Similar to the pandemic, the truth is, there’s really no telling when the global chip shortage will come to an end. Some of the world’s most successful automakers have lost billions of dollars due to the shortage. Orders are backlogged. Vehicle prices are ludicrous due to chip scarcity.

The majority of semiconductor chips come from a Taiwan-based company. Even if demand wanes, the lack of American semiconductor manufacturing is still a huge issue. Automakers cannot keep up with completing orders that have been placed, so the future is bleak.

Billions of dollars are currently being invested to try and create more American semiconductor manufacturing plants. This issue could continue for years without a solution. In this time of uncertainty, one thing is clear: this is one of the worst times to purchase a used or new car in the United States of America.

RELATED: Why Ford Will Reap the Most Benefits When the Chip Shortage Ends