Automobile "Lack Of Core" Or Lasting Half A Year: Automobile Enterprises Face Huge Supply Chain Risk

The lack of global semiconductor supply puts the automobile manufacturing industry at great risk.

Recently, Volkswagen Group, Continental group and Bosch group, the German auto companies, have successively issued early warnings that the global shortage of automotive chips may affect automobile production. This includes the Chinese market, which has brought about demand growth as a result of market recovery, which will continue until next year.

The shortage of chip supply has threatened the security of global automobile industry supply chain. China's auto industry is the first to feel the tension, and some auto companies have been forced to stop production because of "lack of core". The first to hear that production was affected was FAW Volkswagen and SAIC Volkswagen, two of China's top car companies. 21st century economic reporter learned from different sources such as automobile enterprises, parts enterprises and automobile industry personages that due to the shortage of core parts such as electronic components including automobile chips, some factories and individual models of FAW Volkswagen and SAIC Volkswagen have adjusted their production plans, reduced production shifts or suspended production in a short period of time.

"The uncertainty brought about by the new crown epidemic has affected the chip supply of certain automotive electronic components. The overall recovery of China's market has also further promoted the growth of demand, making the situation even more severe, leading to the risk of some automobile production interruption. " Volkswagen China's response, admitted that the shortage of automotive chips to its huge challenges.

It is not just the north and the south that are affected. "The entire automobile industry has been affected, not only the north and South Volkswagen, but also at least Geely and two Honda (namely Dongfeng Honda and GAC Honda), all of which have been notified of the impact of production suspension." On December 6, a senior executive of a multinational auto parts company told the 21st century economic reporter.

The reporter of 21st century economic report learned from many automobile enterprises that, although the situation of each enterprise is different, the "lack of core" is a common problem faced by the whole industry. Starting from December, the shortage of automobile chips will become more prominent, which will affect all automobile enterprises to varying degrees, and even affect the production scheduling plan of some automobile enterprises in the first half of next year.

Although many car companies said the current car delivery and sales have not been affected. However, it is difficult to solve the problem of shortage of "chips" in the short term. The increasing demand brought by the rising trend of the domestic automobile market coincides with the peak sales season. The huge potential threat brought by the contradiction between supply and demand has brought great pressure to the whole automobile industry.

Why are car companies short of core?

"There is a shortage of all kinds of system components, such as engine ECU, steering ESP, chassis ESP, not only chips, but also various electronic components." The top management of the above auto parts enterprises told the reporter of the 21st century economic report.

In brief, the direct cause of OEM production interruption is the shortage of some core automotive electronics. While the engine control system (ECU) and electronic stability control system (ESP) are mainly provided by Tier1 (the first tier supplier), Bosch and Mainland China occupy the most important market share. The chips required in ECU and ESP are purchased by Tier1 from semiconductor chip suppliers.

Some people in the automotive industry told reporters that the main shortage of automotive chips is MCU (micro control unit), which is widely used in the electronic core components of traditional fuel vehicles. According to the data released by strategy analytics, the number of on-board MCU installed in the world will exceed 2.5 billion in 2019.

Many industry insiders told the 21st century economic reporter that the shortage of automobile chips is caused by two factors: on the one hand, China's automobile industry continues to recover, the market performance is better than forecast, and the growth of automobile chip demand is higher than expected; on the other hand, the global epidemic is spreading, the production capacity of upstream wafer factories is tight, and the chip supply of mobile phones, computers and other kinds of consumer electronic products is provided However, the production capacity of automobile chips is also limited.

"Now when we talk about chips, we are all very sensitive, thinking about geopolitics and national strategy. But it's actually about capacity planning and market forecasting, mainly about OEM and tier 1. " Some people in the automobile industry told reporters of the 21st century economic report. However, the problem of insufficient supply in the global market has been exposed, which only affects the outstanding performance of China's automobile market.

In the first half of this year, affected by the epidemic, the industry's expectations for both the automotive industry and the semiconductor industry are not optimistic. The pessimistic forecast in the first half of the year, to a certain extent, suppressed the production scheduling plan for automobile chip production capacity in the second half of the year.

"The cycle of automobile chips is long, and the production capacity is not easy to plan. This problem may also occur in normal years. We just didn't pay attention to it. On the contrary, if the planning is not good, there will be scrapping of the warehouse, so it is a double-edged sword. " The top management of China region of the above-mentioned multinational auto parts enterprises told reporters.

It is worth noting that China's auto market has been recovering since May. Although the market sentiment in the first quarter is pessimistic, the whole industry has obviously felt the gradual release of automobile market demand in the second and third quarters. In this process, with the growth of China's demand and the gradual recovery of other markets, there is a local shortage of auto parts.

According to the original production capacity planning of automobile manufacturers, the supply of chips will not be a big problem, according to the senior management of some parts enterprises. However, due to the new capacity, additional orders need to be placed with semiconductor enterprises, which will take a longer period of 6-9 months.

However, it is worth noting that the automobile needs a long product development and validation cycle, and the same is true for automotive chips. Moreover, because Tier1 has a very important voice, it is very difficult for automobile enterprises to adjust the supplier system. Taking EPS for example, it has complex structure, multiple integrated functions and relatively expensive price, so the development cycle and test cycle are the longest. Once the chip pre batch supply is not available, it will bring trouble to the normal production.

"Although the supply chain of the automobile industry is extremely complex, the automobile enterprises have experienced market feedback mechanism for many years, and have strong supply chain risk control ability. The shortage of chips is definitely not broken suddenly. It must have gone through a process in the middle. Car companies and Tier1 should have found some problems and adjusted the pace of production. " In December and June, Cui Dongshu, Secretary General of the all China ride Union, said in an interview with the reporter of the 21st century economic report.

In fact, enterprises are not without warning about the shortage of automobile chips. "The purchasing department is actually very sensitive to the relationship between supply and demand, and some enterprises have already noticed this in August and September." Some car company insiders told the 21st century economic reporter that some enterprises had already begun to increase inventory consciously.

Some industry insiders told reporters that under the general shortage of automobile chips, automobile enterprises had to adjust the production plans of some models and factories, so as to minimize the losses.

"Car companies are still quick to judge the market. Therefore, they will, according to the market demand, invest their scarce resources on models that bring higher economic benefits." Some car companies told reporters of the 21st century economic report.

The shortage may last more than half a year

In an interview with the 21st century economic reporter, many people in the industry said that the impact of the shortage of automobile chips on automobile production and the reasons behind it are very clear to all, but it is very difficult to solve the problem.

"To solve this problem, OEM needs more accurate market forecast, Tier1 needs better capacity planning, tier2 tries to shorten the lead time." Some people in the automobile industry said.

In this process, all parties need to cooperate, and Tier1, represented by Bosch and Continental, plays a key role.

Although both the mainland and Bosch said that they were strengthening cooperation and communication with semiconductor manufacturers and making every effort to minimize the impact, many people from Tier 1 enterprises told reporters that the problem of insufficient production capacity of chip factories is difficult to solve in the short term, and the shortage of chips in the industry will last for at least half a year.

The question of how to make the situation worse is no longer urgent. At this stage, the delivery of most car companies has not been affected. If the shortage of production capacity cannot be solved, the production capacity of some models can not meet the market demand. It is only a matter of time.

A senior member of Bosch China was slightly helpless when interviewed by the 21st century economic reporter. "The capacity of the chip factory is insufficient, and we have no way. We can only increase investment, help chip factories invest and expand capacity, but it may take months. "

"We have been in close communication with semiconductor manufacturers. At present, semiconductor chip manufacturers have begun to expand production capacity to cope with the sudden increase in supply demand. However, considering the normal delivery time of the semiconductor industry, the current supply shortage will be improved in 6-9 months. Therefore, the supply situation is expected to remain severe by 2021. " On December 6, the reporter of the 21st century economic zone told the mainland China group.

In addition, some people in the automobile industry told reporters that due to the shortage of production capacity of upstream wafer factories, automobile chips are actually in a state of competing with mobile phones and other electronic consumer goods.

"Compared with mobile phone chips and 5g chips, there is no high profit margin for mobile phone chips. Therefore, when the capacity of wafer plants is tight in the world, cars and consumer electronics are competing for chip capacity, which is not dominant. " On December 7, a car chip employee told the 21st century economic reporter.

In addition, it is worth noting that in the field of automotive chip investment, with the growth of the scale of intelligent Internet connection and new energy vehicles, many chip enterprises have paid more attention to IGBT, sensor and other fields full of great commercial prospects.

Many people in the industry expressed concern about the price of automobile chips when they were interviewed by the 21st century economic report. In the current situation of serious imbalance between supply and demand, the price rise of automobile chips will be a high probability event.

The top five suppliers of global on-board MCU are NXP, Infineon, Renesas electronics, STM and Texas Instruments, occupying half of the market. Among them, there have been several enterprises spread the news of price rise.

Recently, it has been reported that some customers have received the notice from NXP. In response to the "substantial increase" in material costs and the "serious shortage" of chips, the company has to raise the prices of all products in order to solve the unforeseen cost growth brought about by suppliers.

Renesas electronics, a Japanese semiconductor manufacturer, also sent a price increase notice to its customers, saying that the company had to raise its price to ensure the continuous input and production of these products due to the pressure of inventory, cost increase and product transportation risk. The price adjustment of Renesas will take effect on January 1, 2021.

In the case of chip shortage affecting automobile production capacity, OEMs and Tier1 have to accept the rising price. Cui Dongshu believes that in the current situation of fierce competition in the automobile market, it is difficult to pass on the price of such costs to consumers, and the possibility of rising automobile prices is not high, and the increased costs may need to be digested by main engine manufacturers and parts suppliers themselves.

Will it affect the automobile terminal market?

The shortage of chips has had a practical impact on the production capacity of some automobile enterprises. For auto companies, the end of the year and before the Spring Festival is the traditional peak season of auto sales, and the market of China's automobile market has been improving recently. If the production capacity of some models can not keep up at this time, it will not only bring a certain degree of economic losses, but also may give up the market share to competitors.

Of course, on the whole, the shortage of chips is a challenge for the whole automobile industry, and different automobile enterprises will encounter more or less challenges.

"Stopping production will affect the market terminal, depending on the time span of the impact." On December 7, Zheng Fu, global senior partner and vice president of Greater China of Roland Berger, said in an interview with 21st century economic reporter.

Zhu Yulong, a senior automotive electronics engineer, believes that the problem of (chip) shortage is more from December 2020 to the first half of 2021. This kind of impact may involve all automobile enterprises to varying degrees, and it is difficult to keep up with the production scheduling according to the demand.

However, Cui Dongshu believes that the impact of the decline in production is limited, and the car market is not as pessimistic as expected. "Many car companies still have some models in stock. Car companies can adjust the production plan to reduce the impact, but also to part of the inventory. "

In his opinion, judging from the trend of the car market, China's passenger car market is expected to grow by 7% next year, and the market demand exists. Although the supply of other car models will be affected by the supply of other car brands.

"Although the production capacity of some models of some car companies will cause a gap, this does not mean that all cars will not be produced, and the impact will be limited. Consumers can choose similar models from other car companies. " Cui Dongshu said.

In addition, there is fierce competition between auto companies in this two years. Therefore, in the mainstream joint venture or independent brand market, even if some car companies have insufficient supply of some models in the short term, there will be no obvious increase in terminal price. Otherwise, consumers will be snatched away by competitors.

"Chip shortage will not have a big impact on the end consumer market. Demand determines supply, and we expect China's auto market to achieve positive growth next year. " Cui Dongshu told reporters.