Japanese motor industry giant Toyota saw its profits fall by 21% for the last three months of 2021 as the global chip shortage hit production, reports BBC News.
The company said that its third quarter operating profit came in at 784.4bn yen (£5bn; $6.8bn).
The world's best-selling carmaker also cut its annual production target by 500,000 vehicles to 8.5 million. It comes as manufacturers around the world are struggling to find enough microprocessors for their products.
"We sincerely apologise for the inconvenience caused to our customers due to the series of production volume reductions since last summer. We are working to restore full production as soon as possible," Toyota said in a statement.
In September, Toyota slashed its worldwide vehicle production by 40% because of the chip shortage.
Rival carmakers including Volkswagen, General Motors, Ford, Nissan, Daimler, BMW and Renault have also cut vehicle production in recent months. Separately, in January Toyota warned customers in Japan that they would have to wait for up to four years to take delivery of its new Land Cruiser SUV.
The pandemic saw a surge in demand for consumer electronics and medical devices, which all contain computer chips. That meant there weren't enough semiconductors left for carmakers. When the global chip shortage first hit the motor industry early last year Toyota was relatively well prepared compared to its rivals.
It had faced a similar issue in the wake of an earthquake and tsunami a decade earlier. Back then, chip-making factories were damaged, which meant major production disruptions for Toyota and other carmakers. Toyota reviewed its supply chain and started stockpiling. That meant it had enough semiconductors to last for months.
But as the pandemic dragged on, those stocks are running low and the company now expects to miss its global production target. And analysts predict the chip shortage could last until next year.
Chipmakers are now battling to win customers in the auto sector after the semiconductor shortage highlighted the size of the market, especially as the growing electric vehicle (EV) industry calls for even more advanced technology.
When will the shortage ease?
Experts disagree, but there’s a consensus emerging that it won’t happen in the first six months of 2022. The United States Department of Commerce recently surveyed industries that use chips in manufacturing. The survey revealed that manufacturers who build everything from cars to medical equipment held a 5-day inventory of microchips this month. The same survey in 2019 found an average inventory of 40 days.
The semiconductor chip shortage caused by the coronavirus pandemic is very unlikely to end in 2022 and most manufacturers have been hit. Already millions of vehicles have been delayed. For the most part, 2022 looks like it will still be another year of struggles as manufacturers race to catch up with backlogs of car orders.