TAIPEI -- Taiwan's leading chip manufacturers have promised to "do their best" to tackle the chip shortage that is paralyzing the global automotive industry, the island's Economic Affairs minister said on Wednesday, but with production lines already running at full capacity, she warned that the situation will take time to improve.
Economics Minister Wang Mei-hua also defended the island's semiconductor manufacturers, saying they had warned customers that reductions in chip orders last year could be "dangerous" for vehicle supply chains.
Her comments illustrate how the issue has taken on international political dimensions. Taiwan's government has received requests from "like-minded" countries including the U.S., Japan and the European Union via diplomatic channels asking for help to alleviate the chip shortages, Wang confirmed.
Wang was speaking after a lunch meeting with executives from four companies -- Taiwan Semiconductor Manufacturing Co., United Microelectronics Co., Vanguard International Semiconductor and Powerchip Semiconductor Manufacturing Corp. -- that produce chips for automobile chip developers worldwide such as NXP, Infineon, Renesas Electronics, Rohm and STMicroelectronics.
"All these chipmakers' production lines are already running at full capacity and some are even over-loaded ... But we have reached a consensus that our chipmakers will do their best to support automaking clients in the U.S., Europe and Japan as there are so many jobs involved and it is crucial to the world's economy," Wang told reporters after the meeting.
"They have agreed to increase their loading to between 102% and 103% or even more, with all additional capacity prioritized to automotive-related chips."
Chipmakers started to optimize and improve their production lines from the end of last year, she added, "but this really is an issue that can't be solved overnight."
Chip production, moreover, takes time. Making a general power management chip, for example, takes roughly 50 days, plus an additional week of packaging and testing before it can be shipped to chip developers. These chips must then be built into modules and finally assembled into cars. For some advanced chips, production can take up to three months.
Wang said all four chip manufacturers agreed to talk to their customers in other areas to see if any can reduce orders or delay shipments, so chips for the car industry can be prioritized. Nikkei earlier reported that the chip manufacturers' production capacity has been fully booked until near the second half of 2021.
"This is no easy task. It will involve complicated commercial negotiations," Wang said, adding that chipmakers have contractual obligations and that there is no guarantee that clients will agree to delay their orders. "They still need to keep their promises to their other customers."
Wang said Taiwanese manufacturers had warned automotive chip developers when they repeatedly reduced their orders in the first three quarters of last year that doing so could be "dangerous". She added that auto chip shortages are mainly affecting traditional carmakers rather than electric vehicles.
The lack of chips has caused serious production disruption for several companies: Germany's Volkswagen has reduced output in China, while Ford has idled some production in the U.S. Honda, Daimler, and Nissan have all reduced production because of chip shortages.
The minister said the incident highlights the importance of Taiwan's chip industry, the world's second-largest by revenue after the U.S.
UMC said it was not easy to increase capacity now but said it would prioritize output to help ease the automotive chip shortage.
"We have our own way to [address] the priority while keeping our commitment to non-auto customers," UMC co-president Jason Wang told investors on Wednesday.
The company said its production utilization has been running at 100% since the third quarter of last year.
Separately Taiwan's MediaTek, the world's No.2 mobile chip developer after Qualcomm, expects overall chip supply tightness to continue throughout the next few quarters, MediaTek CEO Rick Tsai said in an earnings call on Wednesday.