Japanese semiconductor maker Roman Semiconductor says key semiconductors for cars and industrial machinery are likely to remain in short supply for at least the whole of next year, further exacerbating the possible impact of the global chip crisis.

The Kyoto-based chipmaker's customers include Toyota Motor Corp, F.US and HMC.US. Isao Matsumoto, chief executive of Roma Semiconductor, said the company began to increase production capacity last September and plans to invest another 70 billion yen ($636 million) in the current fiscal year, but the impact of these investments will not be immediately apparent because production equipment takes longer to deliver.

"all our production facilities have been operating at full capacity since September last year, but there are a lot of orders from our customers," Matsumoto said in an interview this week. " "I don't think we can complete all the backlog orders next year."

Mr Rom, along with peers such as Infineon Technologies AG, warned that supply chain woes could last much longer than previously expected. The chip has been delivered for more than 20 weeks, as the Delta variant complicates efforts to resume normal operations from Japan to Southeast Asia.

In recent weeks, shortages of materials and parts, coupled with congestion on trains, ships and airplanes, have forced global carmakers from Toyota to Volkswagen to cut or suspend production. Toyota said last week that it would temporarily suspend production at 14 plants.

Roma Semiconductor, founded more than 60 years ago, has become an integral part of the automotive supply chain as carmakers add more electronics and semiconductors to their cars. The Japanese manufacturer's automotive solutions include equipment for power management, air conditioning, lighting and entertainment.

At present, the most serious production bottleneck is the lack of materials for the manufacture of lead frames. The lead frame is a metal structure inside the semiconductor unit that communicates signals with the outside of the package.

"the price increase proposal won't work at all because our suppliers don't have inventory on hand," Matsumoto said. Even if it is booked by us, the speed of arrival is not as fast as we expected. "

Chip shortage may be good for profits

Bloomberg Intelligence analysts Masahiro Wakasugi and Ian Ma wrote in a research note: "Roman Semiconductor's operating margin is likely to expand because its planned capacity expansion may herald growth in sales and profits, as well as growth in overseas market share in the face of global chip shortages."

However, some analysts warn that demand could end up falling suddenly, as additional production lines will start to increase capacity and customers will get enough inventory.

Kazunori Ito, head of equity research at Morningstar, said, "the current crisis is due to insufficient output from suppliers and worried manufacturers are trying to buy more parts than they need." "both will disappear around 2023."

The current supply shortage means that Roma has had to shelve a previously drawn up multi-year plan to outsource part of the chip production process to overseas contract manufacturing. Given the increasing frequency of natural disasters in Japan, this arrangement is intended to maintain part of its business continuity plan, especially for chips that require cutting-edge technology.

"our plan to ask others to produce the number of chips for us has not changed, but these contract factories currently do not have such capacity and next year looks tight," Matsumoto said. "maybe we can start to restore it from the year after next, albeit gradually."

Roma Semiconductor received two government subsidies this year to boost its production in Japan and Malaysia. But to further support semiconductor manufacturers and their subsidiaries, the Japanese government could offer more incentives, including tax breaks and lower costs for renewable energy, because of rising consumer demand for carbon-neutral production processes, Matsumoto said.

"how much renewable energy we should use in Japan is a huge challenge because we consume a lot of electricity, which is very expensive," he said. " "in terms of increasing our production capacity in Japan, this could be our problem, and moving these production lines outside Japan may be an inevitable option for us to consider."