Chip bottleneck continues to thwart auto industry recovery

Chip bottleneck continues to thwart auto industry recovery

Market news |
By Christoph Hammerschmidt

The auto industry’s crash in 2020 due to production shutdowns caused by the Covid 19 pandemic was followed by a surprisingly quick recovery – TrendForce expects annual vehicle sales to increase from 77 million units in 2020 to 84 million units in 2021. At the same time, the rising popularity of autonomous, connected and electric vehicles is expected to lead to massive consumption of various semiconductor components. However, the procurement activities of the automotive industry across all hierarchical levels of the value chain have not kept pace with the partly unexpected increase in demand. This is exacerbated by the fact that most manufacturers in the supply chain currently only have relatively low inventories as a late consequence of the weak demand in the previous year. This results in bottlenecks in production with the consequence that significantly fewer vehicles can currently be delivered than the existing production capacities would actually allow.

The current bottleneck situation in the IC supply chain has gradually spread from consumer electronics and ICT products to the industrial and automotive markets. In the past, manufacturers in the automotive semiconductor industry were mainly based on IDM or fab-lite business models, such as NXP, Infineon, STMicroelectronics, Renesas, ON Semiconductor, Broadcom, TI, etc. As automotive ICs typically operate in a wide temperature and high-voltage range, have a relatively long product life cycle, and have high reliability and longevity support requirements, it is more difficult for the industry to move its production lines and supply chains elsewhere.

However, given the current shortage of production capacity across the foundry industry, wafer capacity for automotive semiconductor components has been noticeably displaced by other products. Some of these examples include automotive MCUs and CISs, which are manufactured in advanced 12-inch fabs, as well as MEMS, discrete, PMIC and DDI products, which are manufactured in 8-inch fabs. TrendForce points out that automotive semiconductor products manufactured at the 28nm, 45nm and 65nm nodes in 12-inch fabs are currently suffering the most from bottlenecks, while production capacity at the 0.18µm and higher nodes in 8-inch fabs is also in a long queue for other products.

As in-house IDM manufacturing has relatively high capex, R&D expenses and operating costs, automotive IC vendors have outsourced some of their products to manufacturing service providers such as TSMC, GlobalFoundries, UMC, Samsung etc in recent years. Notably, TSMC pointed out during its 4Q20 Earnings Conference that wafer starts for automotive semiconductors bottomed out in 3Q20, while additional orders came in during 4Q20. As a result, the company is currently considering shifting some of its production capacity from logic ICs to specialty foundry to meet the sudden demand from its long-term customer relationship, the TrendForce experts say.

Related articles:

Chip shortage slows car production

Volkswagen is struggling with massive chip supply shortages

Germany to boost chipmaking after automotive supply chain failure

Opinion: Carmakers taught a lesson in hubris

Covid-19 brings car production in Europe to a halt

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