The fire in March at semiconductor manufacturer Renesas in Japan will exacerbate existing supply chain disruptions, says Fitch Ratings. This is likely to hamper the automotive sector recovery and impact steel demand.

At the end of March, Renesas said the fire damaged a production line for 300mm wafers used in the automotive industry and it will take up to one month to restart the line.

This disruption is likely to affect a number of global carmakers, including Japan-based Toyota, Honda and Nissan, and US and European rivals, given Renesas is the second-largest producer globally of car microcontroller unit chips, Fitch observes.

Samsung chief executive Koh Dong-jin emphasised that current microchip problems will have a negative impact on the company's performance in the next quarter.

South Korea's Hyundai already said it will suspend production at its No.1 plant in Ulsan, South Korea from 7-14 April due to a shortage of semiconductor chips and supply problems for electrical components.

The same problem has already forced major car manufacturers to shut down production lines. Among them are Volkswagen, Daimler, Ford, Stellantis and General Motors. Swedish carmaker Volvo also announced that it will be closing some of its factories in the second quarter.

An extended stoppage at Renesas' factory could prolong the shortage and pose challenges for global carmakers still recovering from the fallout from the Covid-19 pandemic, the rating agency adds.

During the first quarter, production of about 1 million vehicles was delayed due to the global chip shortage. Fitch believes the supply-demand imbalance is likely to be resolved in the second half of this year.