The impact of the shortage of passenger car chips on the automobile industry continues to spread, and Chinese automobile production is also greatly affected, which requires multiple proactive responses.
As the biggest market of new automobile production and marketing in the world, our country already has the mature automobile industry chain. The chip crisis once again highlights the urgency and necessity of independent control of the industrial chain and supply chain. Chinese enterprises must strive to break the situation of being controlled by others for sophisticated core components used in vehicles.
The impact of the chip shortage on the auto industry has spread from Volkswagen to more automakers around the world. Recently, Ford, Fiat Chrysler and other automakers announced the temporary suspension of production at some plants. Volkswagen, Toyota, Honda, Nissan and other automakers also started global production reduction plans.
Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers, said that the chip shortage in China's passenger cars, which started in late December 2020, will have a big impact on the production in the first quarter of 2021, and may have an impact on the second quarter, which needs to be actively dealt with by various parties.
Car production forced to hit the brakes
On Jan. 8, Ford Motor announced that it was shutting down production at its Kentucky plant because of a shortage of semiconductor chips.
"The pandemic has affected the supply of chips and related components." Honda has also initiated production cuts, cutting production of its Civic and Accord sedans in North America. Honda is expected to cut production by tens of thousands of vehicles by March.
In addition to cutting production by about 40 per cent of full-size road pickups at its Texas assembly plant, Toyota's joint venture in southern China, Guangqi Toyota, recently suspended production at a production line for models such as the Camry and C-HR. As of press time, production had resumed, but was told capacity had been reduced.
In December, Volkswagen announced that it would adjust production in China, North America and even Europe due to a shortage of semiconductor chips, starting in the first quarter of this year. In response to the news that Jetta models at FaW-Volkswagen's Chengdu plant have significantly reduced production due to a chip shortage, Volkswagen China said it is now closely monitoring the situation and optimizing resource allocation nationwide, hoping to make up the shortfall in the coming months.
Industry insiders revealed that faced with the lack of "core" problem that cannot be solved in the short term, car companies have to take "selective" production cuts, that is, priority to ensure high-end models and high-profit best-selling models demand. Vw's response in China, for example, has been to take the lead in reducing production of lower-priced models and prioritizing premium brands and higher-priced versions of popular models.
"Although some automakers' production capacity of some models will cause a gap, not all cars are not produced. Now there are many competitive products in the market, and consumers can choose similar models from other automakers." As for the impact on the domestic terminal market, Cui Dongshu, secretary general of the National Passenger Car Market Information Association, believes that the impact of the decline in production is limited. "At present, many domestic car companies still have inventory of models, car companies can adjust the production plan, as far as possible to reduce the impact, but also to remove part of the inventory."
In response to consumers' concerns about rising prices, he said that in the past two years, China's auto market has entered a period of adjustment, with fierce competition among automakers and an intensifying price war. In the mainstream joint venture or self-owned brand market, there will not be a significant increase in terminal price even if the supply of some car models is insufficient in the short term. Otherwise, there is no competitive advantage.
Multiple factors have led to a shortage of chips
Automotive chips fall into three broad categories. The first category is responsible for computing power, which includes processor and controller chips such as central control, ADAS (Advanced Driver Assistance systems) and autonomous driving systems, as well as engine, chassis and body controls. The second type is responsible for power conversion, for power supply and interface, such as the IGBT (insulated gate bipolar transistor) power chip for EV; The third type is sensor, mainly used in various radar, air bag, tire pressure detection.
According to the introduction, the chip shortage is mainly divided into two types, one is used in ESP (electronic stability control system) MCU (micro control unit). In the Chinese market, ESP is generally available for vehicles with more than 100,000 yuan, especially middle and high-end models. It is a part of the vehicle active safety system, can play a role in preventing sideslip. The other is the MCU in the ECUs (electronic control unit). ECU is widely used in various automobile control systems and is called "driving computer".
Major chip suppliers in Europe and Southeast Asia have reduced production capacity or shut down factories due to the COVID-19 pandemic, further aggravating the imbalance between chip supply and demand and leading to the risk of chip shortage or even supply interruption for some downstream enterprises, according to the association. A better-than-expected recovery in China's auto market is also fueling chip demand growth.
In addition, driven by the development of 5G technology, the demand for chips in the field of consumer electronics is increasing rapidly, and chip production capacity is facing challenges, seizing part of the production capacity of automotive chips.
More importantly, with the continuous improvement of the degree of electrification, intelligence and connectivity of vehicles, the value of vehicle chips continues to rise, driving the global demand for vehicle chips faster than the growth of vehicle sales, which directly causes the imbalance between supply and demand of chips. "Chips are becoming more and more important for cars, which will overtake PCS and mobile phones as the biggest demand side for chip companies in the future." Yu Kai, founder and CEO of Beijing Horizon Robotics Research & Development Co., predicted that "the scarcity of chips for vehicles will continue in the future."
Chinese automotive chip enterprises need to be stronger
As the world's largest market for the production and sales of new cars, China already has a mature auto industry chain. However, it is an inescapable fact that the high-end and sophisticated core auto parts, such as chips, are still in the hands of foreign companies. The chip shortage once again highlights the urgency and necessity of the industrial chain and supply chain autonomy and control.
Statistics show that in 2019, the import rate of automotive chips exceeded 90%, and advanced sensors, vehicle-mounted networks, three-power systems, chassis electric control, ADAS, automatic driving and other key systems are over-dependent on imports. More than 98 percent of IGBTs, which are the second most valuable electric vehicle after power batteries, are imported from foreign countries, and their prices are 1.2 to 1.8 times higher than those of foreign countries.
"The chip shortage has also made many automakers realize that they should not rely too much on overseas suppliers in the supply chain, but should also look for suitable chip suppliers in China, which is also an opportunity for our own chip R&D manufacturers." Yu Kai said that since the release of Horizon Journey 2, China's first car-scale AI chip designed and developed by Horizon, it has successfully signed double-digit fixed-point models for mass production. "Last year, 160,000 vehicles were delivered to consumers with Horizon chip, and this year there will be 1 million".
"China's need for in-car chips with autonomous, controllable technology is definitely strategic." Zhao Fuquan, director of the Institute of Automotive Industry and Technology Strategy at Tsinghua University, said that on the one hand, the government should provide effective policy and resource support to relevant enterprises. On the other hand, Chinese automotive chip enterprises should not be limited to supplying local automotive enterprises, but should actively expand and try to enter the supply system of foreign automotive enterprises. Cooperation with international top automotive enterprises will help accelerate the improvement of the strength of Chinese automotive chip enterprises.
Although there is still a long way to go for Chinese chip companies to enter the global automotive supply chain on a large scale, dynamically speaking, the participation of Chinese chip companies is increasing, and it is only a matter of time before the proportion of their chip business equals or even exceeds that of the vehicle business. Zhao Fuquan firmly believes that through the joint efforts of various parties, we will be able to cultivate a strong Chinese automotive chip enterprise.