Chip Shortage Has A Negative Effect on the German Industry

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Industrial production in Germany fell unexpectedly in January. The car industry, among others, suffered from a shortage of chips.

The decline will end eight months of continuous growth for the German industry, German statistics agency Destatis writes.

Manufacturing production in Europe’s largest economy fell 2.5 percent in January compared to December. Analysts had expected slight growth. Industrial production was also 4.2 percent below February last year in January, the month before the first corona restrictions were introduced.

The decrease is partly due to the chip shortage, which meant that car manufacturer Volkswagen, for example, had to stop production at its factory in Wolfsburg for several days. Also, there was a considerably lower production in the construction sector, also because the winter weather hindered activities.

Extensive digitization is increasing global demand for all kinds of chips, and manufacturers have been struggling to keep up with that demand for months. Shortages mainly affect the car industry. In addition to Volkswagen, Mazda, General Motors, Audi, and Mercedes-Benz also complain about shortages, which slows production or even pauses production.

The shortage also affects technology players such as Qualcomm and Sony, who rely on third parties such as TSCM and Samsung for their chips.