Volkswagen's chip shortage can be attributed to the following reasons: Extremely stringent production standards for chips: While general manufacturing industries can relatively easily restart production lines after facing crises like fires, water or power outages, chip production has its unique challenges. Firstly, it requires an exceptionally high level of cleanliness in the production environment. Smoke and dust caused by fires take a long time to dissipate before production can resume. Secondly, restarting a chip production line is highly complex. Manufacturers need to conduct equipment stability tests, small-batch production tests, and other procedures, which are extremely resource-intensive in terms of both manpower and materials. Therefore, chip manufacturing and packaging & testing companies typically operate their production lines continuously, stopping only once a year for maintenance. This means that recovering from disruptions caused by pandemics or black swan events takes significantly more time in the chip industry compared to other sectors. The bullwhip effect in chip orders: Traditionally, chip orders were placed by automakers who approached multiple agents. To ensure supply, these agents would often increase their order quantities, leading to a severe imbalance between supply and demand by the time the orders reached chip manufacturers—typically resulting in oversupply. Factors such as lengthy and complex supply chains and lack of transparency in information make chip manufacturers hesitant to expand production capacity, as supply and demand can easily become mismatched.
