Can the difficulty of chip shortage to be gradually solved from next year?

By Jeff Lee / Mike Song 2022-11-16

The supply chain of chips and power batteries had become one of the main battlefields of intelligent BEV industry that every major carmaker around the world felt troublesome about the supply stability of these two key components. In the past two years, the global automotive industry has been heavily suffered from the chip shortage, and not recovered yet by now. At the moment that the intellectualization keeps developing and being vastly implemented into automotive technologies, the supply from the semiconductor industry to carmakers should not only rapidly increase the volume, but also the “quality” (high-end chips), so that it can meet the demand of automotive market.

Due to the chip shortage, the vehicle production volume dropped by 10.5 million units around the world last year, which had massively impacted the automotive industry. After this issue was lasting for 2 years, the global production volume impacted by the chip shortage was predicted to decrease to 4.26 million units, which is not as serious as last year; to view from the locations of carmakers, the two regions impacted most are North America and Europe that account for more than two-thirds totally. On the contrary, China only accounts for 6%, which is relatively the least impacted major car manufacturing region in considering of its sales volume. However, these figures didn’t include the issues of logistic delay and the unchained supply of other components. Generally, chip shortage, insufficient supply of BEV batteries, cities lockdown due to the pandemic, the influences of war and unrest, will be the big challenges to the production and supply of major carmakers this year or even the upcoming years. So, can the issue of chip shortage be gradually solved from next year? For instance, the impacted volume can be lowered to less than one million units? This topic can be further discussed in some aspects below…

 

  • The categories and technology levels of automotive chips are vast. After the implementation of the intelligent BEV technology, the demand and complexity of chips will be getting higher. Many carmakers began solving the supply and demand issue of low-end chips on their own, but for high-end chips, they usually rely on the supply from major chip manufacturers. It might easily requires up to thousands of chips to build a BEV, which can’t be shipped out for sale without any one of these chips. Therefore, the keypoint is still the cooperative agreement of supply between carmakers and major chip manufacturers.
  • The chips needed for intelligent BEVs assembly are multiple times as many as traditional ICE cars. The global sales of electric cars (including BEVs and PHEVs) are about 10 million units this year ; if the growth rate is 30% (this might be a conversative estimate ) next year, then the extra chips demand for the additional 3 million units will be equal to as many as the demand of 9 million ICE cars. So for chips demand, we need to separately do the calculation for ICE cars and electric cars then sum them up, instead of directly mixing them together. 
  • The cellphone market situation from next year will influence the stability of the high-end chips supply. The most profitable product for wafer OEM companies is cellphone chips, so that the production scheduling will arrange for the demand of cellphone manufacturers as top priority; The time period between ordering and delivery of automotive chips was usually lasting for months due to that reason, which resulted in a huge challenge to the MTS (Make-to-Stock) plan of carmakers.

According to the current stock level of the four biggest automotive chip manufacturers, it had been recovered to the situation before the pandemic, but the prices hasn’t been returned to the relatively reasonable range as before, which means the issue hasn’t been actually solved yet for carmakers. Moreover, according to the semiconductor analysis from international institute, chips with advanced manufacturing process including autonomous driving high-end AI chips will keep suffering from shortage (it might be affected by the demand of cellphone) in the upcoming years, which will influence the production timetable of high-end technology and car models including the smart cockpit and the autonomous driving. To sum up, the chip supply of ICE cars and low-end BEVs should get back to normal status next year, but it won’t be optimistic for that of high-end intelligent BEVs. This situation might probably be accepted by traditional carmakers, but for BEV brands, they’d better be prepared for the long-lasting fighting.