Semiconductor Component Shortage Hits Automobile Industry, Reports Counterpoint

The impact of COVID-19 on the semiconductor supply chain has extended from consumer to automotive electronics. Since Q2 2020, many automotive electronics suppliers, such as NXP, Renesas and Microchip, have announced price increases for some key components. Some automakers in China even slowed down their car sales due to insufficient supply of these components in Q4 2020.

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COVID-19 reduced automobile sales in H1 2020. The demand started recovering in H2 2020 in many regions but here, too, the pandemic proved to be a spoiler by impacting automotive electronic manufacturing. Furthermore, the limited capacity expansion of 8-inch semiconductor production in the past few years has intensified the shortage. In the short term, this has led to price increases. In the long term, this will transform the global automotive electronics ecosystem.

Automotive electronics’ quality requirement may be rigid and qualification process complicated, but the profit margins are stable and high. Besides, since its product lifecycle is long, it is always the target market for most semiconductor suppliers.

Outsourcing of production to foundry partners

The investment required for setting up an in-house advanced semiconductor manufacturing facility is not only huge but also risky. Further, the reliability testing, verification and qualification of automotive semiconductors may take a long time, affecting the short-term and long-term utilization rates of production plants. Also, both frontend and backend processes need to be optimally synchronized to develop competitive and high-quality products.

As a result, most automotive IDMs (Integrated Device Manufactures) have not set up any new fabs in the past three years and continue to increase the proportion of outsourced manufacturing to reduce production risk. For example, Infineon has decided to increase the foundry service percentage to 70% and 25% for logic and power components, respectively. Renesas has been reducing its fab capacity since 2011 and adding orders to TSMC to become a fab-lite IDM.

The top five automotive electronics companies – NXP, Infineon, Renesas, Texas Instruments and STMicroelectronics – were all affected by COVID-19 in H1 2020. The most affected semiconductor components were microcontrollers (MCUs) and power semiconductors.

Exhibit 1 Automotive Semiconductor Supply Chain

 

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