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Chinese automakers look for way out as chip shortage starts to bite

Xinhua
With the shortage of automobile chips expected to linger, some Chinese automakers need to brace for a short-term disruption to production next year.
Xinhua

With the shortage of automobile chips expected to linger, some Chinese automakers need to brace for a short-term disruption to production next year, according to a local industry association.

A rise in chip prices is also likely, resulting from an increase in advance purchasing by companies along the industry chain and the difficulties of increasing production capacity in the short run, Li Shaohua, an official with the China Association of Automobile Manufacturers, said in a recent interview with Auto Review magazine.

To navigate such a bottleneck, Chinese auto companies and chip makers need joint efforts in technological innovation and upgrading to stabilize production and bolster supply chains.

Computer chips are widely used in the automotive industry, being applied to crucial vehicle parts and functions, such as power systems, chassis control and advanced driver-assistance systems.

However, the relatively conservative sentiments in global chip investment in recent years have triggered unbalanced supply and demand, while the COVID-19 pandemic has exacerbated the cautiousness in capacity investment, said Li, stressing that the automotive chip shortage is a common challenge facing the auto industry worldwide.

Since the beginning of this month, a few automakers have been hit by chip shortages to varying degrees, including SAIC Volkswagen and FAW-Volkswagen, both joint ventures between Chinese automakers and German auto giant Volkswagen AG.

Volkswagen Group China attributed the chip shortage to the uncertainties caused by COVID-19 and the full-speed recovery of China’s auto market, according to an interview with the economic channel of the China Central Television.

Data from the CAAM shows that consumer demand saw a rapid rebound in the Chinese auto market in the second half of this year. Auto sales rose 12.6 percent year on year to 2.77 million in November, the seventh straight month with double-digit growth.

Commenting on the unexpected surge in demand, Li said the chip industry worldwide failed to adapt to the strong upturn in China’s auto market in the second half, as COVID-19 has dealt a blow to major overseas chip suppliers.

Also, the surging demand for chips for other purposes, such as those used in consumer electronics, also contributes to the shrinking production of automotive chips, Li added.

China’s automakers heavily depend on chip imports for production. According to a report on Shanghai Securities News, 95 percent of the chips used in China-manufactured vehicles are imported.

Data also shows that chips for advanced sensors, in-vehicle networks, electric system, ADAS, automation and other key car-manufacturing procedures are mostly imported, with self-made chips accounting for less than 10 percent.

Despite the disruption to production triggered by the shortage, Chinese carmakers have been taking measures to counter the impact.

These include re-adjusting the pace of production, advancing chip-purchasing schedules, seeking more suppliers and optimizing the supply-chain structure, according to Li.

Stressing that delivery to customers has not been affected, Volkswagen Group China said in the CCTV interview it is monitoring the situation closely and coordinating with its headquarters and suppliers to cope with the shortage.

Chinese carmaker BYD said in an interview with the newspaper Beijing Daily that it can produce chips by itself and therefore is not affected by the shortage.


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