Empty “core” auto market, how to solve the shortage of auto chip supply

“Once the supply of automotive chips is cut off, Chinese car companies will not be able to build cars.” In August, an executive of a self-owned car brand made a prediction to Yiou.

In December, a crisis of lack of “core” quickly swept across most of the automobile circle. At the beginning of the month, SAIC-Volkswagen and FAW-Volkswagen reported rumors of production suspension. Immediately afterwards, Bosch and Continental, the world’s first and second largest auto parts suppliers, said that semiconductor chips, one of the auto components, are facing a shortage of supply. It is reported that the shortage of 8-bit MCU chips will directly lead to the inability to produce the two major modules of the on-board computer – ESP (Electronic Stability Control System) and ECU (electronic Control Module).

Not only that, even the Volkswagen Group, which has been rooted in Wolfsburg for more than 80 years, has admitted that there is a crisis of chip supply. On December 18, Volkswagen issued a statement formally acknowledging the shortage of electronic components.

The shortage of automotive chip supply is real, and it is not only the public that is affected, but most car companies are not immune to it.

Although the supply and demand imbalance of automotive chips presented by this crisis is a concentrated manifestation of the entire market in the short term, it has also sounded the alarm for the entire industry at the end of 2020.

Waterwheel “Core”

Multiple factors lead to the lack of “core” in the auto market.

First of all, the epidemic has led to an increase in the demand for chips for medical devices and consumer electronics.

Chips are critical for medical-grade respirators, which can precisely regulate breathing conditions. During the epidemic, the demand for high-end medical devices continued to rise, and semiconductor supply chain manufacturers increased the priority of medical chip orders. Even so, the global demand for ventilators far exceeds the supply.

At the same time, the epidemic has led to an increase in the proportion of telecommuting, which has also prompted a surge in demand for chips in consumer electronics.

According to data from Enterprise Technology Research in the United States, about 72% of employees worldwide work remotely. The popularity of remote work has directly led to a rise in demand for office electronic products such as laptops. According to the latest statistics from market research firm IDC, global PC shipments have risen sharply since the second quarter of 2020, and are expected to reach 290 million units for the whole year, a year-on-year increase of 9.2%.

The impact of the epidemic has further squeezed the production capacity of automotive chips.

Volkswagen said in a statement that due to the spread of the epidemic and the decline in car sales, semiconductor makers have allocated more production capacity to other customer segments. It can be seen that at the most critical moment of the epidemic, Tesla, General Motors, Ford and other car companies have also turned their energy into medical supplies.

The performance and demand of the auto market seem to have not received the attention they deserve.

McKinsey once predicted that world car sales will drop by 29% in 2020, of which China’s car sales will drop by 15%.

But Zheng Yun, Roland Berger’s global senior partner and vice president of Greater China, is more optimistic about China’s auto market. He once told Yiou that the decline in China’s auto market in 2020 should be about 10%.

The actual situation is far better than the above expectations. According to data from the China Association of Automobile Manufacturers, in the first 11 months of this year, China’s auto sales were 22.47 million, and the decline narrowed month by month.

As Zheng Yun said: “There is no cold winter in China’s auto market.”

Due to the underestimation of the expected sales of automobiles in the world, “leading to the recovery of the automobile market, the entire industry, including the Volkswagen Group, is facing a shortage of electronic components.” The Volkswagen Group admitted frankly.

“From a superficial point of view, the shortage has a greater relationship with the impact of the epidemic.” Xu Chao, vice president of Xinchi, told Yiou, “Because the epidemic in China has been effectively controlled, the recovery and rebound of automobile production and sales are still relatively strong. Compared with the recovery of demand in China’s auto market, the global auto market is still in a state of adjustment, so automotive chips in the global supply chain are prone to inversion.”

He also pointed out the deeper problems behind the chip shortage: even though China is the world’s largest single car market, Chinese car companies are still seriously implicated in the international chip shortage crisis.

Xu Chao further explained that from the perspective of component supply and the autonomy of the vehicle’s electronic and electrical architecture, Chinese manufacturers’ right to speak is still at a low level. “The relationship between China’s auto industry chain and the chip side still has a lot of room for improvement. In order to form an orderly market in the end, the entire industry chain needs to cooperate more closely and communicate more smoothly.”

Today, chips are one of the most critical components for cars to achieve functions such as autonomous driving, power and transmission, and in-vehicle entertainment.

According to ICVTank data, in 2019, the global automotive chip market has reached about 46.5 billion US dollars. With the popularity of the new four modernizations (electrification, intelligence, networking, and sharing) among Chinese automakers, the application of chips in China’s auto industry is increasing. At the same time, the chip is also the core engine of the 5G era. In the future, higher-level smart cars will rely heavily on 5G technology.

Empty “core” car market

Faced with the problem of chip shortages, Volkswagen is constantly looking for solutions, and will adjust production in China, North America and Europe to adapt to the supply in the first quarter of next year and limit the impact of chip supply bottlenecks.

But as Volkswagen said, the crisis is industry-wide.

According to industry sources, most domestic automakers above mid-to-high-end levels may be affected. In addition to North and South Volkswagen, joint venture car companies such as Dongfeng Honda and GAC Honda, and self-owned brand car companies such as Geely Automobile, Changan Automobile, and Chery Automobile have reported the same problem.

On December 4th, an insider of GAC Honda said: “At present, GAC Honda’s production of small cars is limited due to insufficient supply of chips, and the supply of some models is cut off.” It is using stock chips and said it cannot predict what will happen in January next year.

However, Xu Chao told Yiou: “In this chip shortage crisis, the actual impact and impact on car companies are not as exaggerated as some media claims, and most car companies have a relatively complete supply chain security management and guarantee system.”

Many car companies have come forward one after another, saying that they are “not affected by the chip shortage crisis”.

After rumors of chip shortages came out, BYD chose to speak out as soon as possible: “The company has a complete industrial chain in new energy batteries, chips, etc., which can not only be fully self-sufficient, but also have a margin for external supply.”

The new car-making forces, Weilai, Ideal, and Xiaopeng, also boasted that they were not affected. However, insiders told Yiou that the sales base of new car companies itself is not large, and the monthly sales volume is only 1,000, so it will not be greatly affected in a short period of time. Are not the same.

In Xu Chao’s view, since the resumption of work in March and April this year, some experienced car companies have begun to deploy and reserve raw materials at the chip level. For car companies that have not experienced the shortage crisis, the prediction in this regard is relatively weak.

The problem of lack of “core” may be difficult to solve in a relatively short period of time.

Cui Dongshu, secretary-general of the Passenger Federation, believes that the shortage of chips will not be gradually alleviated until the first and second quarters of next year.

Xu Chao also has a similar view. He also told Yiou: “If the chip shortage problem is to be completely eliminated, it may take until after the fourth quarter of next year. Because chips are an industry that requires more scale than complete vehicles, so in research and development, production, demand More in-depth communication and planning are required in the whole process of production, raw materials and so on.”

Today, the scale of China’s auto industry accounts for more than 30% of the global market. However, the scale of China’s self-owned brand car companies’ chip industry is less than 15 billion yuan, accounting for only 4.5% of the global market. The import rate of China’s automotive chips exceeds 90%, and the import rate of MCU chips is even higher.

The average number of chips in Chinese brand cars is growing, especially in electric vehicles. According to the China Automobile Association, in 2022, the average number of chips in Chinese brand electric vehicles will be as high as 1,459.

The realization of China’s “core” is imminent.

Lying on the “core” to taste the gall

Increasing the independent research and development of chips and deepening cooperation with chip companies is one of the main ways for most car companies to deploy the chip industry.

On the road to self-developed chips, new car companies are not far behind. At present, both Ideal and Weilai have built autonomous driving teams and started the road of self-development of chips.

In this chip shortage crisis, BYD, which is generally regarded by the industry as “the most confident”, also formed a team to develop IGBT (Insulated Gate Bipolar Transistor) as early as 2005. In March last year, BYD and Huawei launched strategic cooperation in the fields of automotive intelligent networking and intelligent driving.

Insiders said that at the macro level, car companies and Chinese chip manufacturers need to deeply understand the many factors behind the shortage of automotive chips, and to carry out deeper and more substantive exchanges and industrial cooperation.

However, chip self-research and self-production capabilities cannot be achieved overnight. BYD seems to be calm in the face of danger, but it has actually been running on the road of chip self-development for more than 10 years.

Xu Chao pointed out that most of China’s independent chips are low-end discrete devices and radio and navigation chips; high-performance and high-reliability automotive chips are relatively lacking. “In the automotive chip industry, China is more than 10 years behind advanced countries.” He said frankly, “If we don’t do it this year, we will be 11 years behind next year; if we do it now, we may only be 5-8 years behind next year.”

However, at present, the industrial cooperation relationship between Chinese chip manufacturers and international chip manufacturers has been strengthened, and the importance of car companies to chips has generally been gradually increased to a strategic level. Xu Chao predicts that China’s automotive chip industry will see significant results in the next 3-5 years. “

“There is no overtaking in the chip industry.” An industry expert who did not want to be named said that developing chips requires a long investment.

At present, a lot of capital has flowed into the chip field in the market. According to incomplete statistics from Yunxiu Capital, in the first seven months of this year, there were 128 semiconductor equity investment cases in China, with a total investment of over 60 billion yuan, a year-on-year increase of over 200%.

According to the analysis of the above-mentioned experts, a large part of the reason comes from the continuous introduction of policy support by the state.

In August this year, the State Council’s “Several Policies for Promoting the High-Quality Development of the Integrated Circuit Industry and Software Industry in the New Era” pointed out that in order to further optimize the development environment of the integrated Circuit industry and the software industry, it will formulate and introduce fiscal and taxation, investment and financing, research and development, import and export, Policy measures in eight aspects, including talent, intellectual property, market application, and international cooperation. In December, the policy was refined and implemented, and chip companies can be exempted from income tax for up to 10 years.

In the past five years, nearly 2,000 chip companies have been born in China.

While facing the fierce competition in the industry, players are also under a lot of pressure. “Although there are many chip companies now, the performance of most players is not qualified.” The above-mentioned experts said.

“In the short term, we can rely on external forces such as policy support to promote the development of Chinese chips, but in the long run, it will not work.” An industry insider said. This means that players will eventually withstand the “big waves” of the market, and only high-quality chip companies can survive.

Jia Jing, a partner of Delian Capital, believes: “A maximum of 3 or 4 companies in a chip segment will break through successfully, and only the top two will have the opportunity to obtain a good living state.” She believes that the chip industry has strong players With the cumulative effect of Hengqiang, long-tail companies will have a hard time living.

“It’s hard to say that China will be able to truly localize chips in the next 10 years.” The above-mentioned industry insiders said, “First of all, it needs the guidance of national strategies; secondly, only by strengthening the emphasis on education and basic science can China’s chip industry be fundamentally improved. Competitiveness.”