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Ford expects rebound in semiconductors and demand for new vehicles to boost 2021 profits – TechCrunch

Despite the semiconductor shortage spike in the second quarter of 2021, Ford says it has performed better than expected by capitalizing on strong demand for new vehicles, like its Bronco SUV, according to its latest report on results.

In April, Ford expected to lose about 50% of its planned second quarter production, resulting in a loss of profit for the period. However, the automaker was able to generate a company-wide adjusted profit before interest and taxes of $ 1.1 billion, according to the report.

With demand for the Mustang Mach-E, which CEO Jim Farley said was already profitable in Wednesday’s earnings call, and other Ford vehicles up 7 times year-on-year Later, Farley said that “the company is ‘in the spring’ for a rebound when semiconductor supplies stabilize and match demand more closely,” according to a statement released by Ford.

Looking ahead, the company said it “raised its full-year adjusted free cash flow target to between $ 4 billion and $ 5 billion, supported by favorable working capital expected in the second half of the year as vehicle production increases with the expected improvement in semiconductor availability “.

Externally, Ford seems optimistic, but when in a rush on the call, Farley was slightly more cautious and realistic.

“We are seeing the flea problem go through this year and we could see it bleed in the first part of next year,” he said. “We have had discussions with the FAB suppliers. They tell us that they are reallocating capital, increasing the supply for cars, and so on. But I think it’s one of those things where we have to see the relief come before we can really feel comfortable that we’ve come out of the woods here.

Farley said the industry is seeing signs of improvement in chip flow now in the third quarter, but “the situation remains fluid.”

He’s not wrong. Semiconductor sales in May were up 4.1% from April, which saw sales increase 1.9% from March 2021, according to the Semiconductor Industry Association. Additionally, a World Semiconductor Trade Statistics report released in June predicts that global annual sales will grow 19.7% in 2021 and 8.8% in 2022. Earlier this month, the Taiwan Semiconductor Manufacturing Company said that ‘It expects the semiconductor shortage in the manufacturing space to be significantly reduced from this quarter due to its increased production efforts. The company said it had already increased production of microcontroller units by 30% year-on-year in the first half of the year and intended to increase it to more than 30% from levels in the past. ‘before the 2018 pandemic.

It sounds promising, but not everyone is on the same page here. Singapore-based global chipmaker Flex recently warned that the global chip shortage would last until mid-2022, made worse by increased demand for cars, especially electric ones, as well as pandemic-induced purchases. video game consoles, tablets, laptops and other electronic entertainment devices.

Just as Ford tries to reduce battery supply anxiety by becoming the manufacturer through battery cell partnerships with SK Innovation, Farley said Ford is also working closely with manufacturers and suppliers of semi. drivers to help them with future projections of how many chips they expect to need.

One of the main reasons for the semiconductor shortage is that automakers cut orders when the pandemic caused sales to decline last spring. But when the third quarter of 2020 rolled around and demand for passenger vehicles rebounded, chipmakers were already in demand, filling orders from consumer electronics and IT customers.

For Ford’s defense, it’s not easy to predict a pandemic and how many chips it would take for it. Hopefully this doesn’t lead to a hoarding scenario like the great toilet paper crisis of 2020.

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