In 2021, a sudden crisis quickly swept the global automotive industry.
This crisis made Musk lament that it was "a nightmare for the first chain" back then, made Ford CEO Jim Farley complain that "money can't buy it", and let Volkswagen brand CEO Thomas Schaefer slam the ** business lion and raised the price by 800% overnight, and even made Zhu Huarong, chairman of Changan Automobile, call for "carrying out anti-profiteering actions to combat hoarding and speculation".
The crisis that made car company executives complain in person is the shortage of chips.
Over the past three years, the global chip shortage has wreaked havoc on the automotive chain, forcing automakers to cut production of tens of millions of vehicles, resulting in a sharp decline in new vehicle inventories and profit margins for parts manufacturers.
After the chip is "stuck": production is reduced and inventory is reduced.
From the end of 2020 to the beginning of 2021, the shortage of semiconductors caught the automotive industry off guard. Affected by the new crown epidemic, many chip manufacturers are difficult to keep up with the rapidly growing demand after suspending production, and are forced to consider how to allocate limited output.
To the disappointment of the automotive industry, consumer electronics and other industries were ahead of them when it came to allocating limited chip production.
Tech giants that make mobile phones, computers, televisions, and game consoles are more willing and able to spend a lot of money to maintain their chips**, and the semiconductors they need are often more lucrative with the latest designs. In contrast, automotive companies rely on more mature semiconductor technology for the chips they need, so margins are slimmer.
In this "war for chip allocation", car companies suddenly realized that they were at a disadvantage.
Immediately afterwards, a "core shortage tide" that swept the global automotive industry kicked off.
According to AutoForecast Solutions, a company that has automotive data**, the global automotive market reduced production by 10.56 million vehicles in 2021 and 4.39 million vehicles in 2022 due to chip shortages. AFS expects the global automotive market to reduce production by about 2.47 million vehicles in 2023, with most of the reduction occurring in the first half of the year. This means that the global auto market is expected to reduce production by a cumulative 17.42 million vehicles over a three-year period.
In addition to facing production cuts, chip shortages and other ** chain difficulties have also contributed to a significant decline in new car inventories. In the United States, for example, in the spring of 2021, new vehicle inventories fell to a low of less than 1 million units. According to Cox Automotive's estimates, car inventories began to recover from the summer of 2022 and grew to about 2.5 million units in November 2023 as the ** chain issue was resolved.
While consumer demand remains high, low inventory levels are limiting new vehicle sales. The decline in new vehicle sales, coupled with the instability of the assembly schedule, has led to a significant decline in the profits of the first suppliers, and many parts manufacturers, especially small ones, are in a precarious financial position.
But for automakers and dealers, declining inventories aren't necessarily a bad thing. Automakers prioritize high-margin models such as pickups and crossovers. Dealers are faced with a market situation where demand exceeds supply, so they can reduce the incentives offered to vehicles and increase profits.
Despite the headache of the chip shortage, the past few years have been the most lucrative in the history of automakers and dealers. Fiorani said that in order to maintain high margins, automakers continue to prioritize the production of high-end models over entry-level models.
Automakers are realizing that profits will also be stronger when producing high-margin models, and assembly lines seem to be working well. The only problem is that consumers who have a demand for entry-level models will be squeezed into the used car market. ”
Fiorani also said that this could provide a seat for new entrants to the U.S. market.
In the 60s and 70s of the 20th century, American automakers produced cars with unsatisfactory design and quality, which opened the door for Japanese automakers to grow their sales in the United States; In the 80s and 90s of the 20th century, U.S. car imports** soared, resulting in Hyundai and Kia successfully grabbing market share. This seems to be similar to the current situation.
"The next new entrant is likely to be a Chinese company," Fiorani said. Due to tariff restrictions, the Chinese company needs to produce cars outside of China for the U.S. market, however, this seems to be just around the corner. There are already Chinese automakers who intend to produce cars in South Korea and other Southeast Asian countries, and more importantly, they may well be able to open factories in Mexico. ”
Post-crisis reflection: rethinking the relationship with the ** chain.
For the automotive industry as a whole, the chip shortage has taught a painful lesson.
Sam Fiorani, Vice President of Global Automotive** at Autoforecast Solutions, said: "Looking back at the semiconductor shortage, the first thing that stands out is the 'arrogance' of the automotive industry. For more than a century, the automotive industry has recognized itself and its importance to the industry. As a result, automakers are not accustomed to being left behind when it comes to acquiring parts**. ”
Maybe the automotive industry has a demand for semiconductors with other industries, but they have realized that they are not the most important customers when it comes to chips. ”
At present, the chip shortage has entered its fourth year, but the shortage problem is easing and gradually disappearing. For many automakers, the chip shortage has not brought their chains to a halt, at worst it has only caused production cuts, and new car inventories have now returned to normal.
However, the chip shortage has left a bad "memory" for the automotive industry, forcing companies to reimagine production processes and prompting some automakers to prioritize the production of models with higher profit margins, and also prompting the United States, Europe** and many manufacturers to push to strengthen the ** chain and chip production to mitigate risks.
Analyst Phil Amsrud said: "Businesses have had to rethink their relationship with the ** chain. ”
Dan Hearsch, managing director of AlixPartners, noted, "Automakers have become more closely related to chip manufacturers. In the past, procurement personnel didn't pay much attention to chip manufacturers, but now, the chairman even personally calls semiconductor companies, just to establish a better relationship and understand the situation. ”
At a time when enterprises are rethinking the relationship with the chip chain, countries around the world are also worried about the chain, and then they have introduced chip-related bills, aiming to promote the development of the local semiconductor industry and help solve the problem of chip shortage in the future.
In the United States, for example, Biden** pushed through the Chips and Science Act in 2022, which provides $52 billion worth of subsidies for the research, design, and production of semiconductors in the United States, including $2 billion for traditional chips used in the automotive industry, and a 25% tax credit for semiconductor manufacturing investments by 2026. It aims to help the U.S. improve its competitiveness against Asian countries such as China and South Korea, which dominate the global semiconductor market.
The CHIPS and Science Act comes at a time when the U.S. semiconductor industry has ushered in a number of huge investments.
Among them, TSMC invested $12 billion to build a chip manufacturing base in Arizona, USA, which is expected to be put into use in 2024. Intel and SK have also pledged billions of dollars to invest in new facilities and research in the United States.
At the same time, Bosch announced in April last year that it had acquired California chipmaker TSI Semiconductors and plans to spend $1.5 billion to upgrade its factory to become a silicon carbide chip production hub by 2026. Paul Thomas, president of Bosch Mobility Americas, said Bosch is still seeking federal funding for the project, but plans to move forward with the upgrade.
Thomas revealed, "We are still modernising some aspects of the plant in order to get a good start in the silicon carbide space by 2026, and of course, we won't be fully operational by then." This is a meaningful and reasonable industrial upgrade plan with sufficient rewards and risks, and we are happy with it. ”
In addition to establishing a closer relationship with the chip chain, automakers have begun to combine the current industry trends to deploy new chip production capacity cooperation.
As automakers launch new electric vehicles, the demand for silicon carbide chips across the industry is expected to rise. When applied to EV inverters, silicon carbide chips have new advantages over traditional silicon chips, allowing for faster charging and longer range, which forces traders to scramble to secure the silicon carbide of the future.
In June last year, Vitesco Technologies paid $1 billion for a silicon carbide chip deal with Japanese chipmaker Rohm. Sandy Stojkovski, CEO of Vitesco Technologies North America, said: "We want to make sure we have enough chips**, which means we need to build strong technology partnerships. ”
Thomas noted that even if automakers scale back some electrification plans in anticipation of lower-than-expected consumer demand, demand for new chips will still rise "because we need to make existing hybrid and electric vehicles more efficient," Thomas noted.
After years of chip shortages, securing chips** has become a top priority for automakers. But before the chip shortage happened, it was hard to imagine. (Gasgoo Tan Xuan).
*: Gasgoo.