Automotive chip inventories rebounded for the first time, and major manufacturers such as Infineon and TI released positive signals. Has the automotive market gone through a trough?
Automotive chip
In the circle of auto sales, the saying "Golden Nine, Silver and Ten" will circulate, that is, September and October of each year are the time when major auto companies start to sell. However, according to statistics released by AutoForecast Solutions, sales in major global auto markets in October all showed a downward trend year-on-year. Even new energy vehicles have failed to maintain a high growth momentum, and the European and American auto markets are considered to have bottomed out.
Among the reasons for the market downturn given by analysts and senior practitioners, "lack of core" is the most common word. Now, there are positive signs that the market is back on track. Statistics show that the inventory of five automotive chip suppliers including Renesas, NXP, Infineon, STMicroelectronics and Texas Instruments has increased for the first time in three quarters. , An increase of 0.7% year-on-year.
The five companies had their own "difficulties" before
There is no doubt that the above five companies all play a pivotal role in the automotive chip market. According to Strategy Analytics' statistical report on the automotive semiconductor market share in 2019, NXP, Infineon, Renesas, Texas Instruments and STMicroelectronics are the top five companies in this field.
Source: Strategy Analytics
However, in the past year, the five companies have all experienced production problems of varying degrees. Coupled with the impact of the epidemic, some conventional car chips have become hot commodities.
The first is the Texas Blizzard, which forced the closure of Texas Instruments, Infineon and NXP's factories there. Infineon’s chief operating officer Jochen Hanebeck said in response to the issue of factory impact that according to Infineon’s latest assessment, the shutdown will make it unable to fully meet customer needs.
Moreover, he also particularly emphasized that the Infineon Austin factory was already operating at full capacity before the shutdown, so when the production capacity is fully restored in June 2021, the lost capacity during the period cannot be compensated.
According to NXP's statement, the shutdown of the Austin plant is expected to cost more than 100 million U.S. dollars. Moreover, the difficulty of fab recovery is not low. Steve Frezon, senior vice president of front-end operations at NXP Semiconductors, defines it as "a challenge that has never been seen before."
For Infineon's global operations, the forced shutdown of the Austin plant was within the company's tolerance, so Infineon expected after the blizzard that this accident would not affect Infineon's annual revenue.
Infineon’s greater challenge lies in Malaysia. The company has three factories in Malaysia, a wafer manufacturing & testing plant in Kulim, and two packaging and testing plants in Malacca. The ongoing epidemic in Malaysia makes the company feel a little bit tricky. The picture below is a notice sent by Infineon to customers after the outbreak in the Malaysian factory. The notice mentioned that Infineon’s production in Malaysia has been greatly affected by the recurrence of the global new crown epidemic and the Malaysian government’s “comprehensive movement control order”.
Source: Infineon
As a global semiconductor center, the epidemic prompted the Malaysian government to issue a "comprehensive action control order" that has also had a great impact on Renesas and STMicroelectronics. Renesas has two factories in Penang, Malaysia, for the production of automotive MCUs and analog chips. Although the two factories did not report production shutdowns like the Infineon factory, the pressure on human resources and logistics caused by the epidemic will still affect their normal operations.
Renesas also encountered a fire in a Japanese factory in the first half of this year, which caught fire due to excessive current in the production line equipment. According to reports, this factory in Ibaraki Prefecture, Japan is a 300mm wafer fab, of which two-thirds of its capacity is used to produce automotive chips. Renesas Electronics CEO Hidetoshi Shibata also publicly stated at a follow-up conference that the shutdown caused by factory fires will aggravate the global supply of automotive chips.
STMicroelectronics also encountered great challenges in Malaysia. A factory of the company in Johor, Malaysia, was shut down for a long time due to the infection of its employees, and was later quarantined from August 16th to 18th. Prior to this, the strike at the French factory of STMicroelectronics had caused large-scale shortages and price increases of related devices.
Judging from the descriptions of downstream manufacturers such as Bosch, the Malaysian epidemic has dealt a huge blow to the global automotive semiconductors. Xu Daquan, Executive Vice President of Bosch China, used the term "life is better than death" in the circle of friends, which shows how the supply situation is. bad.
In addition to Blizzard’s challenges to the production capacity of its four plants in Texas, Texas Instruments is also deeply affected by the global shortage of 8-inch wafers. This is also a common problem. The explosion in demand for automotive chips has made the original stable 8 The inch wafer supply and demand system collapsed directly, and the supply was very tight.
Texas Instruments’ previous power management chip supply cycle exceeded 50 weeks. One of the important reasons was that the company could not get enough 8-inch wafers and could only selectively use limited wafers to produce higher unit prices. As a result, the supply of some power management chips is not very stable.
For various reasons, these world-renowned semiconductor manufacturers have experienced some device supply problems, which also caused derivative problems such as dealers' excessive asking prices and rampant counterfeit goods. But we are very pleased that the statistics as of the end of September 2021 show that the inventory of the five majors seems to usher in an inflection point, and the industry is finally about to squat and start to take off.
The auto market releases multiple positive signals
In addition to the positive signal that component inventories have rebounded year-on-year, there has been a lot of news in the field of automotive chips that boosted market confidence in recent times.
In terms of capacity guarantee, Infineon recently officially announced the opening of its 300mm thin wafer power semiconductor chip factory in Villach, Austria. According to reports, the chips produced by the factory are mainly used in fields such as automobiles, data centers, and solar and wind energy.
"The new factory is another important milestone in the history of Infineon’s development, and its start-up operation is also a major benefit for Infineon’s customers." Infineon CEO Reinhard Ploss said, "We want to expand our production capacity in the long-term through the new factory. , Through the linkage of the three factories in Dresden, Villach, and Malaysia to increase our production capacity, so that our supply capacity can cover all companies and fields around the world."
Texas Instruments also emphasized at its third-quarter financial report that after discussing with customers, they confirmed that they are interested in Texas Instruments' "expansion of internal manufacturing capacity plans, as well as related production lines and testing." At present, Texas Instruments has publicly disclosed its expansion plan, which will be completed in four phases. This brand new 12-inch wafer fab will be used to replace the original 6-inch wafer fab. The first phase will invest 6.5 billion U.S. dollars, and construction will begin in 2022, and production capacity is expected to be released in 2025. The next three phases will begin in a unified manner in 2028.
It was also mentioned when STMicroelectronics announced its 2020 financial report that the company will invest nearly US$2 billion in capacity expansion.
Let's look at Renesas again. In order to solve the shortage of automotive chips, Renesas Electronics President Shibata Yingli said in an earlier interview with the media that he will actively invest in the future to expand production capacity. In terms of specific implementation, Renesas Electronics is expected to increase its annual equipment investment of about 5% of its revenue to a higher level.
Another positive sign on the supply side is that since the end of October 2021, the Malaysian factory problem that has plagued automotive chips for a long time has finally been resolved. According to an executive of a private equity company in the semiconductor field, "According to the news we have learned, the labor force of Malaysian fabs has recovered to 100% at the end of October, and operations are now back to normal."
On the other hand, automakers are no longer waiting to die, and have begun to take the initiative to seek direct cooperation with chip manufacturers to improve the stability of supply.
According to previous reports by electronics enthusiasts, General Motors has been studying the basis of tiered supply in more depth, and will cooperate with 7 companies including Qualcomm, ST, TSMC, Renesas, ON Semiconductor, NXP and Infineon to develop chips. . Ford also announced that it will cooperate with GF to develop automotive chips for Ford Motor to cope with the shortage of chips.
This method of manufacturers directly intervening in the chip design/manufacturing process can improve the supply efficiency between each other on the one hand, and at the same time increase the transparency of the supply chain, and greatly reduce the space for middlemen to operate in violation of regulations.
Electronic enthusiasts.com also confirmed from industry veterans when investigating the inflection point of MCU prices not long ago. Starting from July 2021, the market has returned to calm, and the demand has dropped a lot. It is obvious that a large number of middlemen have begun to sell goods. . However, some people in the industry mentioned at that time that MCUs are indeed not so hot in consumer applications, but it will take time for the automotive MCU market to recover.
In addition, the automobile sales market has also changed its strategy during periods of severe core shortage. It is no longer difficult for car owners to buy a car, and often they even need to increase prices. According to reports, at present, the sales prices of 4S stores of many car brands have returned to the level before the lack of cores, and the business has gradually returned to normal.
