Two manufacturing giants have today (4 August) issued new financial reports showing the impact of supply chain disruption on profits.
Japanese auto-manufacturer Toyota warned that quarterly profits have fallen compared to last year, while British firm Rolls-Royce, which makes engines for the aviation sector, cautioned that the wider trading environment remained difficult.
Ongoing production issues
Toyota’s profits fell nearly 18% in the April-June quarter of 2022 when compared to the previous year as a semiconductor shortage dented production, according to the Independent.
The company has repeatedly cut production targets in response to supply chain constraints and officials have apologised to customers who have been waiting for cars long after ordering them.
Assembly line problems
Bloomberg reports that semi-conductor shortages, higher material costs and Covid lockdowns in China have caused production problems globally, with auto-manufacturers hit particularly hard.
Citing similar production problems, German conglomerate BMW warned of a deteriorating outlook for the motor industry as a whole, according to the Times.
Rolls-Royce reported a decrease in profits in their half-year results statement, announcing £125 million profits over the first six months of 2022, down from £307 million for the same period last year.
According to City AM, the engineering firm blamed the decline on a combination of snarled supply chains and increased costs from rising inflation.
Outgoing CEO, Warren East, said in the announcement that the company was “actively managing the impacts of a number of challenges, including rising inflation and ongoing supply chain disruption."
The FT reports that Rolls-Royce has taken time to emerge from the pandemic due to continuing restrictions on international travel. The firm receives a large part of its income from the manufacture and servicing of engines for large aircraft for companies like Boeing and Airbus.
Reuters reported that efforts to resolve semi-conductor shortages are becoming embedded features of vehicle development, with auto-companies negotiating directly with chipmakers to deal with the blockage.
Ongoing tensions between China and Taiwan could exacerbate the problem.
As reported previously by the IOE&IT Daily Update, Taiwan plays an outsized role in global semiconductor chip production. Share prices for semiconductor companies plunged in response to the news of Nancy Pelosi’s trip to the island nation.
However, Al Jazeera notes that Chinese trade restrictions on Taiwan conspicuously left semi-conductors untouched as China also relies on Taiwanese exports of the goods.