Conexus Analyzes Indiana Manufacturing Microchip Supply Disruption – WISH-TV | Indianapolis News | Weather Indiana

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INDIANAPOLIS (Inside INdiana Business) – Workers at Subaru’s Indiana Automotive plant in Lafayette return to work this week, after a two-week vacation, due to a global semiconductor shortage. The company suspended production last month due to a disruption in the supply of some microchip-based parts, an issue facing the entire auto industry.

SIA says semi-trailers full of parts arrive at the factory every 24 minutes or so, and many of those parts rely on microchips.

“It’s everything from all of your driver assistance systems to your lighting, interior lighting, turn signals, chassis, safety equipment, infotainment center powertrains. These cars are just littered with it, ”said Bryce Carpenter, vice president, industry engagement for Conexus Indiana, the state’s advanced manufacturing and logistics initiative.

SIA, like many advanced manufacturers, relies on “just-in-time” delivery of supplies to reduce their inventory storage costs.

“There are all these very complex and precise systems out there that maximize efficiency, maximize value for money. And we did it because we could, ”Carpenter said. “It works when everything is normal. But as we have seen, things are no longer normal.

Without the smart parts, automakers in Indiana were forced to adjust production schedules. For example, the General Motors (NYSE: GM) assembly plant in Fort Wayne parked hundreds of partially assembled pickup trucks until the necessary accessories arrived.

What is uncertain, according to Conexus, is how long will automakers be forced to adjust production with an unreliable supply of microchips.

“We know that the capacity and production of the vehicles are going to be lower. But how do we balance that, so that we’re not online, offline, online, offline as we continue to go through this shortage that many expect in the third quarter of this year for the auto industry? Carpenter wonders.

When there is a disruption in the supply chain, like microchips, there are ripple effects that can turn into a tsunami in a state where manufacturing is a vital economic driver.

Conexus says a third of the state’s gross domestic product and 500,000 jobs are directly linked to advanced manufacturing, including automobiles, medical devices, aerospace and defense, all of which rely on these tiny brains operational.

The United States accounts for 12% of microchip production. The rest is made in China, Japan, South Korea and Taiwan.

Conexus says the shortage indicates the need for the United States to increase production of microchips, but this investment does not come cheap.

“Billions, billions of dollars of investment to get production online. And the lead time is extremely long, ”said Michael Schmierer, director of operations and strategic initiatives at Conexus Indiana. “Semiconductors, unlike other manufacturers, have a very long delivery time. It’s not like they can just flip a switch and ramp up production or set up a new manufacturing facility very quickly. “

Last month, the White House hosted a summit with major U.S. manufacturers, including automakers, to explore solutions to the chip shortage and build supply chain resilience.

President Joe Biden has said he has bipartisan support for legislation to fund the semiconductor industry. He previously announced plans to invest $ 50 billion in semiconductor manufacturing.

Intel Corp. California-based Nasdaq: INTC, which manufactures chips for computers and other electronics, said at the meeting that it would start producing semiconductors for the auto industry within six to nine months. .

Tom Linebarger, President and CEO of Columbus-based Cummins Inc. (NYSE: CMI), took part in the panel discussion.

“We appreciate the Biden administration’s discussion with the business community to explore solutions to address the global chip shortage and strengthen supply chain resilience,” the company said in a statement. “We are working to minimize the impact and we appreciate the collective efforts of government and others to develop short and long term solutions to increase supply of chips that meet the unique needs of the automotive industry.”

As industries work to alleviate the current problem, Conexus says the progression of the problem prepares for the likelihood of another microchip shortage.

“So how do we avoid the next disruption? Or how can you better prepare for the next disruption? Because it’s not if there will be one, but when, ”Schmierer said.

Schmierer said the 2011 earthquake and tsunami that hit Fukushima, Japan shut down several semiconductor factories for several months due to damage or blackouts in the power grid. The natural disaster exposed a weakness in the supply chain, which was felt in Indiana. Ten years later, there is still a weak link in the chain.

“From an economic point of view, we must prevent the next mass shortage. Because the investment won’t be able to find its way to new capacity in a US-based manufacturing operation quickly enough to resolve shortages, ”Carpenter said. “It’s about mitigating the fallout, finding stability in your supply chain and planning, and then working together as a country to prevent such manufacturing dependencies from remaining as and when we are progressing.”

Conexus Indiana cautions that there is no immediate solution to the multi-faceted supply problem. However, business researchers hope to learn lessons from this most recent supply chain challenge.

Schmierer and the Conexus team are collaborating with the Lacy School of Business at Butler University to analyze supply chain resilience and assess the impact of disruption on manufacturing in Indiana. They contributed over 12 months of data. The report is expected to be released in June.

“Companies will be able to use it to make informed decisions, data-driven decisions, to increase the resilience of their supply chain,” said Schmierer. “Because at the end of the day, if supply chains don’t work, two things happen: First, we don’t have the goods that people buy to keep the economy going. And second, time off does happen and time off has a direct impact on the economic mobility of thousands of Hoosiers. “



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