By William Zhang and Greg Gao
Both Chinese officials and IC industry players say that the chip shortage in the country has hit bottom and supply will go up in the 4th quarter, but the situation will remain through the next one or two years.
At a briefing on Tuesday, Luo Junjie, a spokesman for China's Ministry of Industry and Information Technology (MIIT), said that the tight chip supply would ease in the country's auto industry. The chip shortage has hurt Chinese and multinational companies, including some large foreign brands of auto companies.
JW Insights lead analyst Han Xiaomin said that the overstocking of ICs by the Chinese OEM companies and distributors had reached the ceiling, and supply to OEMs is improving.
CnEVPost, a website focusing on electric vehicle news from China, quoted Cui Dongshu, secretary-general of the China Passenger Car Association (CPCA), as saying, "The darkest days of auto chip supply have passed, with production and sales expected to continue to strengthen in China in the coming months."
The biggest obstacle to increased automotive chip supply is the shortage of core components brought about by the Covid-19 outbreak in Malaysia, a crucial global hub for the semiconductor industry. Still, efforts have been made to secure a recovery in production in Malaysia, Cui said.
"With the improving control of the Covid-19 pandemic overseas, coupled with the promise of increased production from TSMC, although not very credible, I remain optimistic and confident that the darkest hour for automotive chip supply is over and the situation will continue to improve in the future," Cui said.
The case with Bosch China is still concerning. Chen Yudong, President of Bosch China, told the press last week that currently, the company could only meet half of the semiconductor needs of car companies. When the shortage was the most serious in July, the auto part giant could only meet 20% of the market demand. The chip supply was slightly better in September and October.
He predicted that Bosch China's supply capacity in the 4th quarter of this year will still be very tight. Next year it will return to the situation in the first half of this year, that is, around 10%~20% of its clients' orders will not be delivered, and it is impossible to meet all market demands.
As a tier-1 auto parts supplier, Bosch China purchases semiconductor components from STMicroelectronics, Infineon, and other companies for integration and assembly and then provides them to vehicle manufacturers. For example, it supplies 70% of electronic brake control systems in China, according to a Yicai Global report.
A TF Securities report said that Chinese car companies' wholesale sales have started to increase significantly in late September, possibly indicating that the worst moment of the auto chip shortage has passed.
September and October are traditionally peak seasons for auto consumption in China. Still, chip shortages, higher raw material prices, and the Covid-19 outbreak in Malaysia resulted in lower-than-expected auto sales in September, the report added.
On the side of the fabless companies in China, they face the challenges of foundries with production capacity shortages. Han Xiaoming of JW Insights said that there are two types of companies in this situation. One is those listed or well-funded companies that have secured their orders and can handle the situation better; The other is small and medium-sized companies that are cash-tight and struggling.
The MIIT reportedly has formed a working group on automotive semiconductors to strengthen the matching and synergy between supply and demand and promote the improvement of automotive chip supply capacity.
"We will continue to strengthen operational monitoring and analysis, coordinate and solve outstanding problems in a timely manner, and support companies to find alternative solutions through the facilitation measures we have implemented," he said.