Recently, Tesla CEO Elon Musk publicly named Japan’s Renesas Electronics and Germany’s Bosch on social media. Musk said that the company is operating under the extreme supply chain constraints of certain “standard” automotive chips, and these two major automotive chip manufacturers are the “biggest problem” in the supply chain.
The dilemma that Tesla faces is a microcosm of the lack of cores in the global automotive industry. Many car companies are tightening the “belt belt” of production capacity to overcome the difficulties by reducing production or discontinuing some models. The life of the chip factory is also not easy. Xu Daquan, vice president of Bosch China, joked in the circle of friends a few days ago, saying that under the great pressure of core shortage, he even wanted to “jump the building” with the leader.
Xu Daquan said that a chip supplier’s Muar factory in Malaysia was affected by the new wave of new crown pneumonia. Hundreds of more than 3,000 employees were infected and more than 20 people died as a result. The local government closed some of Bosch’s product lines until August 21. This move will directly affect the production of Bosch’s ESP/IPB, VCU, TCU and other chips. It is expected that the supply will be basically cut off in August.
The chip crisis of car companies is seriously underestimated
Previously, industry insiders generally predicted that the core shortage crisis of global car companies would reach its peak in the second quarter of this year. According to Bernstein, an international research institute, the global auto industry may reduce production by 4.5 million vehicles this year due to core shortage. With the expansion of TSMC’s production in August and the commissioning of Bosch’s new automotive chip factory in August and September, the crisis will gradually ease.
Recently, the latest report released by the market research company IHS Markit stated that the global semiconductor shortage will reduce the number of cars produced this year by between 6.3 million and 7.1 million. The supply chain disruption caused by the epidemic will continue to damage the industry until next year. HIS Markit believes that the chip shortage situation cannot be stabilized before the second quarter of next year, and the recovery of supply will begin in the second half of next year. This bleak prospect once again proves that the chip crisis is far from over.
The recent wave of production shutdowns and production cuts by major auto companies has also confirmed this view of HIS Markit. According to the statistics of reporters from China Economic Weekly, some factories of many global auto companies, including Volkswagen, Toyota, Ford, and General Motors, have recently announced the suspension or reduction of production.
The latest news is that Toyota Motor, which is recognized as the best supplier of the supply chain plan, also announced recently that the 14 assembly plants in Japan will suspend production for different lengths of time in September, and only 540,000 vehicles will be produced in September. The car, which is lower than the original plan of 900,000, has been cut by 40% in the production plan, and the risk will continue until October.
Toyota said that the sudden increase in coronavirus cases in Vietnam and Malaysia has exacerbated the semiconductor shortage and also caused the shortage of other auto parts needed for the group’s global network. 27 assembly lines in Japan will be affected, affecting the production of RAV4, Corolla, Prius, Camry and Lexus RX. The news surprised the market. Toyota’s share price plunged 4.4% that day, the biggest one-day drop since December 2018.
Prior to Toyota, the Volkswagen Group announced on August 19 that due to insufficient chip supply, the possibility of production cuts could not be ruled out. Volkswagen would reduce the output of its main factory in Wolfsburg. The Audi brand, which contributes the most to Volkswagen’s profits, will extend the summer break for two factories in Germany by one week because the supply of chips is still very unstable and tight.
Recently, a notice sent by Audi to dealers was also circulating on the Internet, which mentioned the discontinuation plan of Audi CKD model. From August 12, the B9 (Audi A4L) production line began to stop production; from August 13, the Q5LPA production line began to stop production; from August 25, the C8 (Audi A6L) production line began to stop production. The suspension of production is due to the lack of key production modules for the above three models: engine ECU control module, system interaction module, GPS positioning module, involving all models of the C8, B9, and Q5LPA production lines.
In this regard, FAW-Volkswagen Audi did not respond, but many car owners reported that starting from July, some domestic Audis only provide a remote control key and a mechanical key when they are delivered. After the production capacity is restored, they will be reissued. The two keys are then handed over to the consumer by the dealer. It can also be seen how tight the chip is.
In addition, Ford Motor has said earlier that it will suspend the production of its best-selling F-150 pickup truck at its Kansas City assembly plant; General Motors also recently said that due to chip shortages, the company will extend production of multiple seats. The downtime of car and crossover factories; BMW recently warned that as the global chip shortage intensifies, the next few months will be full of uncertainty…
This time the neck is stuck in the packaging and testing process
For this wave of core shortage crisis faced by major auto companies, the Galaxy Securities electronics industry research team believes that it is mainly stuck in the packaging and testing process. Specifically, due to the continuous rise of the new crown pneumonia epidemic in Malaysia, the local government has successively closed the production lines of some packaging and testing plants, which has affected the short-term supply of core chips for the automotive ESP system.
Data from the WHO and Hopkins University websites show that at the end of June, the average number of new cases in Malaysia in seven days was only about 5,000. As of August 24, the cumulative number of confirmed confirmed cases in Malaysia has exceeded 1.59 million, and the existing confirmed number has exceeded 260,000.
Why does Malaysia have such a big impact on the global automotive industry?
Public information shows that Southeast Asia accounts for 27% of the global semiconductor packaging and testing industry share. Among them, Malaysia, the seventh largest exporter of semiconductor products in the world, has more than 50 semiconductor companies setting up factories there, such as Intel and STMicroelectronics. According to data reported by the World Semiconductor Trade Statistics Organization, Malaysia’s IC packaging and testing volume accounts for approximately 13.7% of the global IC packaging market, and it is one of the world’s major packaging and testing centers.
Semiconductor packaging and testing usually refers to the process of processing the tested wafers according to the product model and functional requirements to obtain independent chips. Packaging and testing is the “last mile” of chip production, and Malaysia is the “transit station” for global chips.
The current epidemic situation in China is so well controlled, why can’t the chip packaging and testing link be placed in the country?
In fact, this is difficult to achieve in a short time, and it is not a technical bottleneck. Although automotive chips do not have high requirements on the process technology, compared to other chips (such as mobile phone chips, computer chips), their working environment is worse, and the requirements for service life are higher. Therefore, automotive chips require higher Stability and consistency. In addition, the pre-test and certification process of the chip by the OEM is very cumbersome and takes a long time. Therefore, under normal circumstances, after the initial selection of chip suppliers, car companies will not take the initiative to replace them. Therefore, it is difficult for car companies to introduce new chip suppliers in a short period of time.
However, in the medium and long term, the lack of core will provide more favorable conditions for domestic replacement of domestic automobile chips, and supply chain security issues may prompt the transfer of some production capacity to mainland China.
In this regard, the Ministry of Industry and Information Technology has previously stated that in order to actively respond to the shortage of automotive chip supply, the Ministry of Industry and Information Technology has established an automotive semiconductor promotion and application working group to formulate targeted measures to promote the improvement of the supply capacity of automotive chips, which is achieving certain results. In the follow-up, we will combine far and near, take multiple measures, strengthen the connection between supply and demand, actively support alternative applications, improve manufacturing capabilities, and continue to maintain the stable and healthy development of the automotive industry.
Are self-owned brands ushering in a period of opportunity?
For automobiles, chips will play an increasingly important role in the development of the industry in the future, which means that the domestic automobile chip industry is about to usher in a period of development opportunities. The market share of multinational auto companies due to production cuts and suspensions caused by core shortages has allowed independent brand auto companies to enjoy a period of opportunity first.
According to data released by the Passenger Association, the retail sales of domestic luxury cars in July was 200,000, down 18% year-on-year and 21% month-on-month; mainstream joint-venture brand retail sales were 670,000, down 19% year-on-year and 7% month-on-month. .
Under this trend, 640,000 self-owned brands sold 640,000 vehicles in July, a year-on-year increase of 20%, a month-on-month increase of 5%, and an increase of 23% compared to July 2019. The wholesale market share of self-owned brands was 45.4%, an increase of 12% over the same period last year; and the domestic retail share was 42.5%, an increase of 9% over the same period last year.
In this regard, the Association believes that the industry chain of independent brand head enterprises has strong resilience, effectively resolves the pressure of chip shortages, turns disadvantages into advantages, and has achieved significant increases in new energy. Therefore, BYD, GAC Aeon, Changan, Hongqi, Chery Other brands showed high growth year-on-year.
In fact, more than 80% of the chips of self-owned brand cars rely on imports, which is basically the same situation as multinational car companies. The difference is that multinational car companies have a global game of chess. No matter how important the Chinese market is, they have to constantly move, and even need to make some painful trade-offs. The self-owned brand puts resources and strength together, and the impact is naturally less.
However, with the delta virus raging around the world, the pressure of core shortages of independent brands has gradually begun to appear. A few days ago, Zhang Yuesai, general manager of GAC Passenger Cars, publicly asked for the core in the circle of friends, and even attached specific specifications; Geely also said that the shortage of chips has become more and more serious recently, and the new crown pneumonia epidemic has once again shown an upward trend in the world. The company’s sales in the next few months pose a major threat and will reduce its (sales) chances of reaching the standard; He Xiaopeng, the founder of Xiaopeng Motors, has poetically complained on Weibo, “It will be more bitter to pull the core and cut off the supply, and to toast the sorrow. “.
Fortunately, many self-owned brand car companies have already realized the impact of the lack of core, and have taken steps to find a solution.
Among them, BYD, as one of the few domestic Chinese brands capable of self-developed chips, has started construction on its IGBT expansion project in Changsha. After the completion of the project, it can produce 250,000 8-inch new energy automobile chip wafers annually, which can meet the annual loading requirements. Production capacity demand of 500,000 vehicles.
Great Wall Motor announced in February this year that it had strategically invested in Horizon Corporation to solve the problem of core shortage. A few days ago, Horizon released a brand-new car-level chip-Journey 5. Its single chip AI computing power is as high as 128TOPS, and it can support 16 cameras. The manufacturer claims that the performance exceeds the Tesla FSD and can meet the needs of manufacturers for automatic driving and intelligent interactive functions.
Dongfeng Motor has established Zhixin Semiconductor Co., Ltd. to independently develop and produce 300,000 sets of power chip modules per year, and said that the products can break overseas monopolies and replace imports.
It is not difficult to see that this chip supply crisis has undoubtedly sounded the alarm for Chinese car companies, but it has also accelerated the awareness and ability of independent brands to strengthen independent research and development of chips.