Jun 4, 2021

Japanese Manufacturers Developing Sustainable Procurement

Procurement
SustainableSourcing
Toyota
Nissan
Procurement magazine discusses some of the effects of the semiconductor shortage and how companies like Toyota and Nissan take this knowledge to EV market

Japanese manufacturers are now having to adapt their procurement strategies, partly affected by the recent semiconductor shortage and further challenges that could remove it from the dominant position in the technology industry. The country is also adapting to the changes that the world is facing to combat climate change. In an effort to maintain their leading industry positions, Japanese automotive companies are looking into all the areas they can improve upon to decarbonise their supply chains. 

Looking back on the semiconductor shortage, which started in early 2020, stresses that large-scale industries must maintain flexible procurement strategies and continue to develop their supply chain planning methods. The automotive battery industry is becoming the most prominent across large-scale manufacturers. However, Japan is said to be lagging behind it’s neighbouring countries - China and South Korea - when it comes to automotive battery production. According to a member of a government panel on carbon neutrality in the auto sector, "Japan is far behind China and South Korea in the field of batteries for car use. I'm concerned that we will see a repeat of what happened to the domestic semiconductor and solar panel industries."

The Current State of Technology Procurement

We can expect to see some significant developments in the technology industry, which will likely involve supply chain and procurement developments. Taiwan Semiconductor Manufacturing Co, plans to invest huge amounts in boosting its capacity over the next three years by investing US$100bn, while another major chip maker, South Korea’s Samsung Electronics Co plans to invest US$154bn in semiconductor business within the next decade. These are significant steps for large tech companies to take to ensure that supply chains remain flexible in a volatile market. Especially when you consider the global effects and security implications of the semiconductor shortage. 

Companies that are moving or developing in the battery business are finding barriers to production, including the amount of electricity required for battery manufacturing and lithium, which is a much-needed resource that is in short supply. Sourcing other chemical components for batteries is a wider challenge for supply chains, as components like cobalt and nickel are also in high demand for battery production - Cobalt mainly originates from the Democratic Republic of the Congo. It is most definitely a global affair. 

Much Needed Adaptations to Battery Technology Development

Automakers like Toyota and Nissan are making significant developments in the way they build their batteries. They hope their development of Solid-state batteries will replace liquid electrolytes used in lithium-ion batteries, therefore reducing the overall demand for a resource in limited supply. 

Chief Production Officer at Toyota, Masamichi Okada, has spoken about the company’s plans to meet the demands of the emerging electric vehicle (EV) sector. "With respect to all-solid-state batteries, we are still in the process of developing one, and we are making efforts to speed it up," Okada says.

According to Saeki, who has carried out research on Tesla Motors at the Kansai University, "It's not like EVs will replace cars with internal combustion engines all of a sudden. And there is the issue of how to recycle used batteries," Saeki says. "It will be a tug-of-war with EVs for years to come, though internal combustion engines may be destined to lose favour."

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