A single missing chip can bring companies to their knees

People ignore the importance of semiconductors at their peril and that’s proved by Nissan assembly lines grinding to a halt when Hitachi failed to supply enough computer units to the car giant because its own supplier failed to supply one single little IC.

The curious tale of how components can affect large multinationals was underlined yesterday when Malcom Penn, CEO of Future Horizons, spelled out the cost of regarding little chips as just bricks in a wall.

Hitachi made car computers for Nissan but was caught short by the lack of just one little IC, supplied – or rather non-supplied – by an unnamed semiconductor company.

How does this work? Penn said that the lack of a $10 IC  affected the production of a $10,000 car. Nissan was forced to suspend operation at four Japanese plants in Japan for two days while they tapped their fingers waiting for Hitachi, and its supplier, to get their fingers out.

Said Penn: “The IC is not just a component and the supply chain just doesn’t talk to each other.” Future Horizons has been talking about capacity shortages for months, he said, and security of supplies means you have to get all the ducks lined up in a row. Lack of a single chip means reputations of large multinationals are on the line, and outsourcing isn’t the key to everything, he said.

The same scene is bound to play out again while capacities are almost maxed out, he said.