The impact of the shortage of passenger car chips on the automotive industry continues to spread, and China's automobile production is also greatly affected, requiring active response from multiple parties.
As the world's largest market for new car production and sales, China has a mature automotive industry chain. The chip crisis once again highlights the urgency and necessity of independent and controllable industrial and supply chains. Chinese enterprises must strive to break the situation where high-precision and cutting-edge core components for automobiles are subject to human control.
The impact of chip shortage on the automotive industry has spread from Volkswagen to more car companies worldwide. Recently, car companies such as Ford and Fiat Chrysler announced that some factories will temporarily suspend production, and car companies such as Volkswagen, Toyota, Honda, and Nissan have also started global production reduction plans.
Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, said that the shortage of passenger car chips in China began in late December 2020, which will have a great impact on the production in the first quarter of 2021, and may have an impact on the second quarter, which needs to be actively addressed by all parties.
Automobile production forced to "brake"
On January 8th, Ford announced that its factory production line in Kentucky, USA was forced to shut down due to a shortage of semiconductor chips.
The epidemic has affected the supply of chips and related components. Honda has also launched a production reduction plan to reduce production of Civic and Accord sedans in North America. It is reported that Honda may reduce production of tens of thousands of cars before March this year.
In addition to reducing the production of full-size Tantu pickup trucks produced at the Texas assembly plant in the United States by about 40%, Toyota's joint venture in southern China, GAC Toyota, recently announced a suspension of production on a production line mainly responsible for the production of Camry and C-HR models. However, as of the time of press release, production has resumed, but it has been informed that production capacity has been compressed.
In December last year, Volkswagen publicly announced that it would adjust its production in China, North America, and even Europe due to a shortage of semiconductor chip supply, and began implementing it in the first quarter of this year. In response to the news of a significant reduction in production of Jetta models at FAW Volkswagen's Chengdu factory due to chip shortages, Volkswagen China stated that it is currently closely monitoring the situation and optimizing resource allocation nationwide, hoping to fill this gap in the coming months.
Industry insiders have revealed that in the face of a shortage of "chips" that cannot be solved in the short term, car companies have to take "selective" production reduction measures, that is, prioritize ensuring the demand for high-end models and best-selling models with high profits. For example, Volkswagen's strategy in China is to take the lead in reducing the production of low-priced models and prioritize meeting the high configuration needs of its high-end brands and best-selling models.
"Although some car companies may experience production capacity gaps in some models, not all cars are no longer produced. There are many competitors in the market now, and consumers can choose similar models from other car companies." Regarding the impact on the domestic terminal market, Cui Dongshu, Secretary General of the National Passenger Car Market Information Joint Conference, believes that the impact of declining production is limited, At present, many domestic car companies still have inventory of their models. They can adjust their production plans to minimize the impact and also remove some of their inventory.
In response to consumer concerns about price increases, he stated that the Chinese automotive market has entered a period of adjustment in the past two years, with fierce competition among car companies and intensifying price wars. In the mainstream joint venture or independent brand market, even if some car companies experience a short-term shortage of supply for certain models, there will not be a significant increase in terminal prices. Otherwise, there will be no competitive advantage.
Multiple factors lead to a shortage of chip supply
Automotive chips can be roughly divided into three categories: the first category is responsible for computing power, specifically processor and controller chips, such as central control, ADAS (advanced driving assistance system) and auto drive system, as well as engine, chassis and body control; The second type is responsible for power conversion, used for power supply and interfaces, such as IGBT (Insulated Gate Bipolar Transistor) power chips used in EVs; The third type is sensors, mainly used for various radar, airbag, and tire pressure detection.
It is reported that there are mainly two types of chip shortages this time, one is the MCU (Micro Control Unit) used in ESP (Electronic Stability Control System). In the Chinese market, models priced above 100000 yuan, especially mid to high end models, are generally equipped with ESP. It is part of the active safety system of the car and can play a role in preventing side slip. Another type is the MCU in the ECU (Electronic Control Unit). ECU is widely used in various control systems of automobiles and is referred to as a "driving computer".
CAAC said that due to the COVID-19 in Europe and Southeast Asia, major chip suppliers have reduced production capacity or shut down factories, further exacerbating the imbalance between chip supply and demand, leading to the risk of chip shortage or even supply interruption for some downstream enterprises. The unexpected recovery of the Chinese automotive market has further driven the growth of chip demand.
In addition, driven by the development of 5G technology, the demand for chips in the consumer electronics field is rapidly increasing, and chip production capacity is facing challenges, seizing some of the production capacity of automotive chips.
More importantly, with the continuous improvement of the electrification, intelligence, and networking of automobiles, the single vehicle value of automotive chips continues to rise, driving the global demand for automotive chips to grow faster than the growth rate of vehicle sales, which directly leads to an imbalance in chip supply and demand. "Chips are becoming increasingly important for cars, and cars will surpass PCs and smartphones in the future to become the largest demand side for chip companies." Yu Kai, founder and CEO of Beijing Horizon Robotics Technology R&D Co., Ltd., predicts that "the scarcity of automotive chips will continue in the future."
Chinese automotive chip companies need to become stronger
As the world's largest market for new car production and sales, China has a mature automotive industry chain, but an unavoidable fact is that high-precision core components for automobiles, such as chips, are still in the hands of foreign-funded enterprises. This chip shortage once again highlights the urgency and necessity of independent and controllable industrial and supply chains.
According to data, in 2019, the import rate of automotive chips in China exceeded 90%, and key system chips such as advanced sensors, in vehicle networks, three electric systems, chassis electronic control, ADAS, and autonomous driving were overly dependent on imports. Among them, the value of IGBT in electric vehicles is second only to that of power batteries, with over 98% needing to be imported from abroad, and the price is 1.2 to 1.8 times that of foreign countries.
"The chip shortage issue this time has also made many car companies realize that they cannot overly rely on overseas in the supply chain, and should also look for suitable chip suppliers in China. This is also an opportunity for our independent chip research and development manufacturers." Yu Kai said that since the release of Horizon's first automotive grade AI chip, Horizon Journey 2, designed and developed by Horizon, China has successfully signed double-digit mass-produced fixed-point models, Last year, 160000 cars were delivered to consumers equipped with Horizon chips, and this year there will be 1 million vehicles.
China's demand for automotive chips with independent and controllable technology is undoubtedly strategic Zhao Fuquan, Dean of the Institute of Automotive Industry and Technology Strategy at Tsinghua University, stated that on the one hand, the country should provide practical and powerful policy and resource support to relevant enterprises; On the other hand, Chinese car chip companies should not be limited to supplying local car companies, but should actively expand and strive to enter the supply system of foreign car companies, and cooperate with top international car companies, which will help accelerate the enhancement of the strength of Chinese car chip companies.
Although Chinese chip companies still have a long way to go before entering the global automotive supply chain on a large scale, it is only a matter of time that the participation of Chinese chip companies is increasing dynamically, and the proportion of their chip business is even or even surpassing that of their vehicle business. Zhao Fuquan firmly believes that through joint efforts from multiple parties, China will definitely cultivate a strong automotive chip enterprise.