Toyota may have started the manufacturing strategy just in time but when it comes to chips, its decision to collect what has been a key component in cars goes on and on. back ten years to the Fukushima disaster.
After the Toyota supply chain crash on March 11, 2011, the world’s largest automaker realized that the lead time for semiconductors was far too long to deal with devastating impacts such as natural disasters.
That’s why Toyota came up with an industry continuity plan (BCP) that required suppliers to accumulate anywhere between two to six months ’worth of chips for the Japanese manufacturer, depending on how long it takes. e from order to delivery, four sources said.
And that is why Toyota has so far been largely lost by a global shortage of semiconductors after a rise in demand for electrical goods under coronavirus locks that has led many competitors to stop competing. on production, the sources said.
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“Toyota was, as far as we can tell, the only manufacturer properly equipped to deal with chip shortages,” said someone familiar with Harman International, which specializes in car audio systems. , demonstrations and driver assistance technology.
Toyota engineers are two of the sources who spoke to Reuters and the others are at companies involved in the chip industry.
Toyota surprised competitors and investors last month when it said its product would not be a major concern over chip shortages even as Volkswagen, General Motors, Ford, Honda and Stellantis, among others, were taken over. , to cancel or suspend some production.
Toyota, meanwhile, has raised its vehicle output for the fiscal year ending this month and has increased its full-year earnings forecast by 54 percent.
CLASSIC LEAN LIGHT
The source familiar with Harman said that the company, which is part of Samsung Electronics in South Korea, was suffering from a shortage of central processing units (CPUs) and integrated power management circuits as early as the -November last year.
While Harman does not make chips, due to Toyota’s dealings, it was incumbent on the manufacturer to prioritize and ensure that it had sufficient semiconductors to maintain a supply of its digital systems for four months, or more, the source said.
The particularly scarce chips are now microcontroller units (MCUs) that control a number of functions such as braking, acceleration, steering, lighting, combing, tire pressure gases and water sensors, all four sources told Reuters .
However, Toyota changed the way it buys MCUs and other microchips after the 2011 earthquake, which caused a tsunami that killed more than 22,000 people and sparked a deadly meltdown at the Fukushima nuclear power plant.
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In the aftermath of the quake, Toyota estimated that it could affect more than 1,200 parts and materials and announced a list of 500 priority items that would require secure supply in the future, including including semiconductors manufactured by leading Japanese chip supplier Renesas Electronics.
The impact of the disaster was so severe that it took Toyota six months to get production outside Japan back to normal levels, having done so at home two months earlier.
Toyota’s direct-time system was a big surprise as a smooth flow of parts from suppliers to factories to assembly lines – as well as ongoing investments – was at the heart of its emergence as an industry leader for efficiency and quality.
At a time when supply chain risk is now at the forefront and center in almost every industry, the move shows how Toyota was ready to throw out its own rulebook when it came to semiconductors – and it’s rewarding.
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A Toyota spokesman said one of the goals of its lean investment strategy is to be aware of inefficiencies and risks in supply chains, identify the worst bottles that can and do get out. how could they avoid them.
“The BCP for us was a classic follow-up solution,” he said.
NO BLACK YEAR
Toyota pays for the stock collection arrangement with chip suppliers by returning a portion of the cost cuts it requests from them each year during the life cycle of any car model under so-called annual cost-reduction programs. , the sources said.
Deposits of MCU chips – which often combine several technologies, CPU, flash memory and other devices – are held for Toyota by parts suppliers such as Denso, which is part-owned by Toyota Group, chip makers such as Renesas and Taiwan Semiconductor Manufacturing, and chip dealers. .
While there are different types of MCUs, the currently scarce ones are not advanced sockets but more conventional ones with semiconductor nodes between 28 and 40 nanometers, the sources said.
Toyota’s succession plans for snipers are also mitigated by the impact of natural disasters exacerbated by climate change, such as faster typhoons and frequent rainstorms that cause floods and landslides across Japan, including the manufacturing center of the southern Kyushu region where Renesas also makes chips.
One of the sources involved in semiconductor supply, said that Toyota and its allies had become “more risk averse and sensitive” to the impact of climate change. But natural disasters are not the only danger on the horizon.
Manufacturers fear there will be more turmoil in chip supply due to growing demand as cars become more digital and electric, as well as strong competition for chips from smartphone makers to computers to planes to industrial robots.
Sources said that Toyota has another advantage over some competitors when it comes to chips due to its long-standing policy of making sure it understands all the technology being used. use in its cars, rather than relying on suppliers to provide “black boxes”.
“This basic approach separates us from each other,” said one of the sources, a Toyota engineer.
“From what causes defects in semiconductors to getting detailed information about production processes such as the gases and chemicals you use to make the process work, we understand the technology to inside and out. It’s a different level of experience that you simply can’t get if you just buy those technologies. “
“A call on GRIP?”
There has been an explosion in the use of semiconductors and digital technologies by the manufacturers of this era as a result of an increase in hybrid and fully electric vehicles, as well as autonomous driving and connected car functions.
These devices require even more computing power and partial use of a new segment of semiconductors called a chip system, or SoC, which essentially combines several CPUs on a single logic board.
The technology is so new and specialized many car manufacturers have left major parts suppliers to manage the risks.
Adhering to its blackbox-free approach, however, Toyota developed a deep inside understanding of semiconductors in preparation for the successful launch of its 1997 Prius hybrid.
Years earlier, he gathered engineering talent from the chip industry and opened a semiconductor center in 1989 to help design and manufacture MCUs that were used to control Prius powertrain systems.
Toyota designed and manufactured its own MCUs and other chips for three decades until it moved their chip manufacturing facility to Denso in 2019 to consolidate the supplier’s work.
The four sources said Toyota’s early effort to develop an in-depth understanding of semiconductor design and manufacturing processes was a key reason for its success in avoiding shortages, as well as its continuity contracts.
Two of the sources, however, said they were concerned that Denso’s contract could indicate that Toyota was finally willing to dig its approach without a black box, even if the supplier is part of the Toyota Group wider.
“We were fine this time, but who knows what awaits us in the future?” Said one source. “We may be losing our grip on technology in the name of technology development efficiency.”