Chinese car chip makers make breakthroughs as chip shortage affects car production

According to data released by the China Association of Automobile Manufacturers (CAAM) on February 9, vehicle production and sales in China in January reached 2.388 million and 2.503 million vehicles, down 15.9% and 11.6% respectively from the previous month, and up 34.6% and 29.5% respectively from the same period last year.

CAAM reminded that production fell faster than the previous month, reflecting the lack of supply of automotive chips affecting the pace of enterprise production.

Xu Haidong, a deputy chief engineer of CAAM, said that the shortage of auto chips cars is expected to spread to at least the second quarter, and the second half of the year depends on the production schedule of chip suppliers.

The month-on-month decline was affected by the lack of chips

CAAM data showed that in January, the production and sales of new energy vehicles in China completed 194,000 and 179,000 respectively, down 17.8% and 27.8% respectively from the previous month, and up 285.8% and 238.5% respectively from the same period last year. The production and sales of passenger vehicles reached 1.910 million and 2.045 million respectively, down 18.1 percent and 13.9 percent from the previous month and up 32.4 percent and 26.8 percent year-on-year. The production and sales of commercial vehicles reached 478,000 and 458,000 respectively, with the output down 6.1% month-on-month, sales up 0.5% month-on-month, and production and sales up 44.3% and 43.1% year-on-year, respectively.

CAAM analysis pointed out that there are two reasons for the significant growth of production and sales in China in January compared with the same period last year: first, the current market demand is still recovering; Second, due to the Spring Festival holiday in January in 2020 and the impact of the epidemic at the beginning of last year, the base level is low. But on a month-on-month basis, production fell faster, reflecting the lack of supply of automotive chips affecting the pace of production.

The difficulty of finding auto chips has spread across the global car market. Since the fourth quarter of last year, a number of automobile manufacturers have been reported to reduce production or stop production — Volkswagen, Ford, Subaru, Toyota, Nissan, FCA and other OEMs have successively announced the temporary closure of some production assembly lines around the world, and some automakers even give their employees a “long vacation”.

Bernstein Research expects global auto production to fall by 2 million to 4.5 million vehicles in 2021.

China’s indigenous alternatives face opportunities

According to Autolist Consulting, compared with other auto parts, the automotive chip market competition pattern is relatively stable, the main manufacturers include NXP, Infineon, STMicroelectronics, Renesas, Texas Instruments, Bosch, Anshi Semiconductor and so on. Most of these manufacturers adopt IDM mode of operation, that is, design, manufacturing, sealed testing and sales.

Under the influence of the Covid-19 epidemic, Chinese automakers suspended production in February last year, and European and American automakers successively closed down in March. During this period, many automakers took the initiative to cut chip orders, and chip manufacturers also received notices from automakers to cut orders and suspend shipments.

In the first quarter of last year alone, hundreds of auto plants halted production because of closed management, parts shortages and labor shortages. In the second half of the year, the global car market picked up unexpectedly, and the sales of various brands rebounded, but the main production capacity of upstream chip manufacturers had been put into other industries.

According to CAAM, looking ahead to the first quarter of this year, although China’s economic development situation is generally positive, but the changes in the epidemic and the external environment there are still many uncertainties, especially since the end of last year, the problem of tight supply of chips will also be a certain impact on global auto production for some time, which in turn affects the stability of China’s auto industry operations.

Yu Kai, founder and CEO of Horizon, said that the production of on-board chips needs to be planned 12 months in advance, but in the first half of last year, many semiconductor companies held a pessimistic attitude towards the demand for chips in the automotive industry, so they made more conservative planning, resulting in the high growth demand for in-vehicle chips not being met. As for when the chip supply shortage will ease, Yu Kai believes that the whole supply chain still has the ability to adapt to changes, and it is expected that the tight capacity situation will ease by the middle of this year.

The Ministry of Industry and Information Technology of China is also concerned about the impact of the lack of auto chips in the auto industry.

On February 9th, the official website of the ministry reported that the First Department of Equipment Industry and the Department of Electronic Information of the ministry had a discussion and exchange with representatives of major automotive chip suppliers. The participants exchanged the latest situation of the recent supply shortage of automotive chips and analyzed the future development trend. Representatives of automotive chip suppliers all expressed that they had taken active measures to strengthen market supply capacity by setting up a special working group, strengthening communication with vehicle parts enterprises, starting spare capacity and speeding up logistics transportation according to the current market situation.

Equipment Industry Division I and Electronic Information Division suggest that automotive chip suppliers attach great importance to the Chinese market, increase the capacity allocation, improve the efficiency of circulation links, strengthen coordination with upstream and downstream enterprises, and strive to alleviate the shortage of automotive chip supply, so as to provide strong support for the stable and healthy development of China’s automotive industry.

Tianfeng Securities that the key to making chips difficult to break the contradiction lies in the realization of domestic substitution of the industry chain. Recently, the overall boom in the chip industry is mainly due to tight capacity, with price increases starting at the wafer manufacturing end. The boom continues over the next two quarters, logically spreading to upstream materials as downstream wafer manufacturing begins to look to upstream alternatives. Under the pro-cycle, it is expected that in 2022, there will be an opportunity of “Davis Double-click” featuring domestic substitutions + downstream fab expansion and procurement of rigid requirements.

China’s indigenous chips trying to make breakthroughs

While about 90 percent of China’s automotive chips are still imported, in the medium to long term, the shortage could reverse the broader trend towards homegrown replacement of automotive chips, as one long-time industry watcher puts it. SAIC GM-Wuling and other auto companies have issued official news that affected by the supply of chips, the company has decided to comprehensively promote the localization of vehicle chips.

In fact, at present, China has carried out the layout in each node of the process of automotive chip localization. Datang Telecom, Tsinghua Unigroup, NavInfo, AllWinner Technology, Weier Semiconductor and other listed companies in recent years are also accelerating to deepen the automotive semiconductor industry. Thanks to China’s advanced layout in the new energy vehicle industry, many Chinese enterprises have taken the lead in the field of new energy vehicle chips. For example, BYD, a leading Chinese enterprise of new energy vehicles, is now the leading manufacturer of independent and controllable IGBT in China. Its technology has reached the world’s leading level, with a monthly production capacity of 50,000 pieces and a market share of 18%, ranking second only to Infineon, the veteran chip giant. On January 2 this year, BYD Semiconductor launched a spin-off listing, valued at 10.2 billion yuan, with investors including the well-known Xiaomi, Sequoia and other institutions. It can be seen that the gap between China’s automotive chip technology and international enterprises is narrowing step by step.

In addition, there are many chip companies in the deep layout of new energy car chips: Huawei’s onboard autonomous driving, 5G intelligent network chips and modules have achieved “onboarding”; Weier Semiconductor acquired Howe and Spyco for 15.2 billion yuan in 2019, and entered the CMOS image sensor, now becoming the world’s second largest automotive image sensor; NavInfo and Founder Motor signed a strategic cooperation agreement in November 2020, focusing on automotive electronics In-depth cooperation in the field of chips; the battery monitoring chip applied to the battery management system of new energy vehicles developed by Datang Telecom is the industry’s first single-cell monitoring chip for lithium-ion batteries designed with integrated electrochemical impedance spectrum monitoring technology; NIO will also independently research and develop automotive chips, and it will be part of the self-driving computing chip. Li Bin, chairman and CEO of NIO, even stated that self-developed autonomous driving chips are not difficult, and easier than mobile phone chips.

Source: China Securities Journal, Economic Reference News

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