The global shortage of car chips affects how much

BEIJING, March 31 (Xinhua) — Question: How does the global shortage of car chips affect

Xinhua News Agency reporter Yu Maofeng Liu Chunyan

A fire at a key factory owned by Japanese semiconductor giant Renesas Electronics has exacerbated a global shortage of car chips. Analysts believe the chip shortage is causing major losses to the global auto industry and raising concerns about semiconductor supply chains in major economies. The United States and Europe have proposed to accelerate the reconstruction of semiconductor supply chain, and the game around the semiconductor industry will intensify in the next few years.

Global auto companies are suffering from “core shortage”

Late last year, the problem of undersupply in the global chip market began to become apparent. This year, many automakers around the world have been forced to suspend or reduce production due to “lack of core”.

Volkswagen announced in December that it would cut production at plants in China, Europe and North America in the first quarter of this year. Ford said in early January that it would halt production at an assembly plant in the US. GM announced in February that it would halt production at three plants in the United States, Canada and Mexico and halve production at a plant in South Korea.

Ford said the chip shortage could cut production by 10% to 20% in the first quarter, reducing full-year profit by $1 billion to $2.5 billion. GM estimates the loss of core could cost the company as much as $2 billion in full-year profit.

Since January this year, Toyota, Honda, Nissan and other auto companies have announced production cuts, and some of their production lines in Japan have come to a standstill.

Market research firm EgenHuamai predicts that 1m vehicles worldwide will be delayed in the first quarter of this year due to “lack of core”. The global auto industry will lose $60 billion in sales in 2021.

The imbalance between supply and demand

Industry analysis, the supply and demand imbalance caused by COVID-19 is the main reason for the shortage of automotive chips. Uncontrollable factors such as a fire at a Renesas plant and extreme weather in Texas, a key U.S. semiconductor state, have also constrained chip capacity.

Since the second quarter of last year, major auto companies have reduced production due to the outbreak, and auto chip orders have decreased accordingly. At the same time, the “home order” during the epidemic created a huge demand for computers, mobile phones and game consoles. Orders for chips for electronic products soared, prompting chip manufacturers to shift resources to chips for electronic products. Demand for automotive chips rebounded more than expected in the second half of last year, but chip makers were unable to ramp up production in time because of tight overall capacity.

On March 19, a fire broke out at Renesas’s Naco plant, a key manufacturer of semiconductors used in vehicles, severely damaging some equipment. Hideki Shibata, Renesas president, said it could take three to four months for shipments at the stricken plant to fully return to pre-fire levels. Renesas has about a 20% share of the global market for the crucial semiconductor microprocessors that control the driving of cars, and the fire is adding to the supply of automotive chips.

In addition, the “lack of core” is also related to the development trend of the automobile industry. The vehicle upgrade and “from oil to electricity” shift accelerate the demand for chips in the automotive industry, aggravating the imbalance between supply and demand to some extent.

Supply chain facing restructuring

Chip shortage raises concerns about semiconductor supply chains in major economies. Recently, the United States and the European Union have proposed to accelerate the reconstruction of semiconductor supply chain, to build a more independent supply chain system.

U.S. President Joe Biden said on February 24 he would seek $37 billion from Congress to boost domestic chip production and reverse shortages. Biden signed an executive order the same day that included a comprehensive review of semiconductor supply chain risks.

Prodded by the US government, US companies have begun to restructure their semiconductor supply chains. On March 23rd Intel said it would spend $20 billion on a new chip factory in Arizona.

On March 9, the European Union announced plans to expand the region’s production of cutting-edge semiconductors, aiming to have at least a 20% share of the global market by 2030. The EU believes that an effective way to expand domestic production is to attract big chipmakers to set up factories.

In Asia, the South Korean government plans to lead Samsung Electronics, SK Hynix, Hyundai Motor and other companies to form a chip alliance to ensure the development of automotive and other related industries. While South Korea is a major producer of chips for computers and smartphones, it relies on imports of chips for cars, Bloomberg reported. The establishment of the national team of industrial alliance shows that South Korea will bring its own chip industry strength into play in the field of automotive chips.

Industry insiders believe that the current automotive chip shortage situation is expected to ease in the second half of this year, but the global semiconductor capacity expansion can not keep up with the pace of demand growth, a certain degree of chip shortage may become the new normal, the next few years around the semiconductor industry in major economies will intensify the game.

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