Automobile chips shortage to ease in mid-2021

While the shortage of automobile chips is continuing, with a rise in chip prices, the situation is expected to ease in the middle of the year, according to industry insiders.

Chip supply in the automotive industry has been affected globally amid the COVID-19 pandemic. The problem began last year and was widely discussed due to concern that the lack of chips could affect car production in China.

Automakers are making preparations, including communicating with chip suppliers, optimizing production schedules, coordinating resources and strengthening technology research and development to tackle the shortage.

Chen Shihua, deputy secretary general of the China Association of Automobile Manufacturers, said that based on feedback from car manufacturers in China, the shortage had impacted production and sales and may continue to affect them in the second quarter of this year.

The association pointed out three reasons for the shortage. First, increasing demand in the consumer electronics market in the second half of 2020 squeezed the production capacity of automotive chips. Second, production suspension of chip assembly plants in Japan and Southeast Asia due to a fire and the pandemic. Third, companies predicted a future shortage of chips and increased their inventory.

Stephan Wollenstein, CEO of Volkswagen Group China, said that the shortage of chips will continue in the first half of 2021 and affect all automakers. He hoped the situation would be clearer by April when the Shanghai auto show is being held and would give updated information at that time.

A research report from Great Wall Securities pointed out that it is expected there will still be certain pressure on the supply of automotive chips in the first half of 2021. It noted that semiconductor chip manufacturers had begun to expand production capacity to cope with the sudden increase in demand, but considering delivery times in the semiconductor industry, the supply shortage is expected to improve in six to nine months.

Yu Kai, founder and CEO of Horizon Robotics, said the production capacity of automotive chips must be planned 12 months in advance and the entire supply chain is expected to recover in mid-2021.

Chen Wenling, chief economist at the China Center for International Economic Exchanges, said impact of the chips shortage is mainly in mid and high-end cars, which use a higher proportion of semiconductor chips.

Auto companies realized the importance of chips and manufacturers such as BAIC, SAIC and Geely established joint ventures with semiconductor manufacturers.

Many companies have made breakthroughs in the localization of chips. BYD has already produced automotive chips. Horizon Robotics launched a computing platform and collaborated with car companies such as Changan and Guangzhou Automobile Group Co. Huawei has launched intelligent autonomous driving solutions that integrate self-developed chip and real-time operating systems.

Wanlian Securities said that in the medium and long term, the shortage of chips will benefit the accelerated development of domestic chip companies.