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According to AFS, the global automotive industry cut production of 4.5 million new vehicles in 2022 due to chip shortages. Looking ahead to 2023, the chip shortage will continue to affect car production, with production cuts expected to reach 3 million vehicles. The automotive chip market is growing faster than other sectors, including smartphones and data centers. Modern cars need more chips, and these chips are more expensive than ever. Due to strong demand, automotive chips are expected to be one of the few segments of the chip industry with severe shortages throughout this year.

But there is also news on the positive side, the chip manufacturing giant TSMC recently said the trend of tight supply is expected to ease. TSMC CEO Wei told analysts on a conference call: “Automotive demand continues to grow and we may still not be able to supply 100% of the wafers they need at this time, but the situation is improving. We expect the shortage to ease soon and expect automotive shipments to grow again this year.”

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A few days ago, the news of a big dive in chip prices sparked widespread concern in the industry. According to CCTV financial reports, an STMicroelectronics chip is the core component of the electronic control system, was one of the most in demand chip products in 2021, the market offer once rose to about 3,500 yuan a, 2022 from the high level of decline to about 600 RMB, a price reduction of more than 80%.

In this regard, Zhang Qiang said that the price plunge of the chip is a consumer chip, not an automotive chip. The price of automotive chips is only “from a very irrational price, back to a slightly more rational price range, and not a price drop. The previous increase in chips such as MCU (micro control unit) chips and power chips, etc., the demand is still relatively tight.

Zhejiang University, director of the Institute of Microelectronics, Chinese Academy of Engineering, Wu Hanming also said in his speech, comprehensive from the demand, supply side of the future development trend of the automotive chip industry, the overall demand is expected to continue to expand in the future. Some of the supply side of the chip supply has been eased, but most of the chip supply will continue to be tight.

Zhang Qiang expects that the shortage of MCU, power supply chips, interface chips and other types of shortages will continue until next year, because the automotive chip supply model to a certain extent determines the supply tension will be a long-term problem.

“Counting from 2000, in terms of consumer chips, there is usually a big downward cycle in three or four years.” He said that the consumer chip volume is larger, less variety, the chip factory can stock in advance, but the automotive industry chain is very long, from the chip to secondary suppliers, primary suppliers, and then to the car factory, the industry chain is far longer than the cell phone, coupled with the number of companies doing automotive chip is less, the reflection of the development of the industry demand is relatively conservative, “you have demand, give money I do not increase production. Unlike the consumer is a big up and down environment, automotive semiconductor production orders, do not see orders not production, demand increases when there will be a shortage of goods, so it has been maintained in the normal supply and tight supply of two states, rarely like the consumer class has a large inventory.”

Zhang Qiang also talked about the cell phone chip and car chip company’s business logic and support logic are different, because the number of cell phone parts is limited, while the number of car parts is huge, “one of the parts can not, the car can not get out, it will affect other functions. So within the car chip, it will become a reciprocal shortage of state, for example, a part is missing, the car manufacturer said the other also do not want first.” This has also led to chip companies generally adopt a more conservative supply strategy.

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The sources said suppliers engaged in the automotive industry supply chain are actively negotiating with foundries for available fab capacity in the fourth quarter and seeking additional capacity support in that quarter.

On the other hand, the sources pointed out that the slowdown in demand for personal computers and other consumer electronics applications has dragged down the foundry’s capacity utilization. Nonetheless, automotive chip orders can only make up a small part of the capacity gap in the third quarter.

In the fourth quarter of 2022, foundries that do not have the ability to fill their fab capacity with more automotive chip orders, especially second-tier foundries, will still see a significant decline in their fab capacity utilization, the sources said.

Sources said that for the first-tier foundries, only 5-10% of fab capacity in the fourth quarter will be affected by weak orders for mass-market products.

Currently, the supply of seriously tight automotive chips including MCU and IGBT. sources pointed out that the supply of industrial-grade MCU and other ICs also remains relatively tight, which also prompted relevant chip suppliers to compete for more available capacity in the fourth quarter.

However, as industrial ICs than automotive chip validation time is shorter, industrial chip orders may be more quickly fill the foundry in PC and other consumer electronics chip customers left capacity gaps.

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