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January 22, 2021

Chips are out of stock, German automakers ask the government for help

According to the Financial Times, because of the chip shortage crisis, German automakers asked the government led by Angela Merkel to help alleviate the severe semiconductor shortage. The current situation poses a threat to the German automobile industry (one of the country's largest industries) and may even paralyze automobile production.

At the end of last year, the unexpected recovery of global automotive demand caused a sudden surge in demand for key chips from manufacturers. Semiconductor manufacturers—whose largest customers are manufacturers of smartphones and tablet computers—cannot meet this demand.

The German auto industry hopes that political intervention can help raise the priority of auto suppliers on the chip manufacturer’s customer list, especially in Asia. However, according to industry insiders, automakers are currently not even in the top ten of the above-mentioned list; technology giants such as Samsung and Huawei enjoy priority.

Volkswagen, the world's largest automaker, has been forced to give tens of thousands of workers mandatory vacations. The group has stated that its auto production in the first few months of this year will be reduced by at least 100,000 vehicles due to this problem.

Mercedes manufacturer Daimler also had to cut production, while Ford has closed its Saarlouis plant in Germany until mid-February.

"All parties involved are stepping up their efforts globally to improve semiconductor supply in the automotive industry." The German Automobile Industry Association (VDA) said in a statement on Tuesday. The auto industry lobby group added that it "maintains contact with the German government on this issue."

As the German Association of Automobile Manufacturers made this move, the US auto industry lobby also turned to the US government and the new administration led by the incoming Joe Biden. Discussions were also held between the Japan Automobile Manufacturers Association (JAMA) and Japanese government officials.

The German Ministry of Economic Affairs stated that it is "monitoring the situation very closely" and is in contact with automakers that are currently having trouble getting chips from Asian suppliers.

The ministry added that in the medium term, “expansion of (semiconductor manufacturing) production capacity in Germany and Europe is important and critical”, and the ministry is funding 18 companies to establish chip factories in Germany.

According to analysts' estimates, the semiconductor supply bottleneck may last for several weeks, because it takes 3 to 6 months to increase semiconductor supply.

According to a report written by Frank Biller, an investment analyst at the Baden-Württemberg State Bank of Germany (LBBW), this year's global car production may be reduced by as much as 2.2 million vehicles due to this problem. Each modern car is equipped with dozens of chips, which drive everything from parking sensors to entertainment systems.

At the time of this crisis, auto industry executives are delighted to see a strong rebound in car sales, especially in China. According to people familiar with the matter, if it were not for the shortage of semiconductors, Volkswagen would have hired more employees to meet the recent growth in demand.

However, the German group headquartered in Wolfsburg said it expects to make up for lost capacity in the second half of the year.
There is a shortage of automotive chips, US automakers ask the government for advice
According to earlier media reports, US automakers have requested the assistance of the US government to put pressure on Asian semiconductor manufacturers to transfer part of their production capacity to automotive chips. The industry is worried that if the chip shortage is not relieved, the production blockage may continue until this fall.
The American Automobile Policy Committee (AAPC), a lobbying organization representing the three major U.S. automakers, is urging the U.S. Department of Commerce and the upcoming Biden administration, hoping that the U.S. government will put pressure on Asian semiconductor companies to shift the production capacity of consumer electronics products. Make key chips for vehicles.
Analysts said that as the automotive semiconductor chip shortage is evolving from an economic and industrial problem to a political problem, if major Asian foundries such as TSMC and UMC are willing to increase production or fully allocate capacity, it may be able to prevent the production reduction scenario that the automotive industry is facing. It's just that the process conversion still takes some time.
In an interview with Bloomberg on the 15th, AAPC President Blunt said: “We have asked the United States to help us find a solution, because if the problem is not resolved, it will reduce my country’s production and it will be detrimental to the US economy. We are not mainly looking for who caused the global shortage Goods, we only hope that there is a solution. The solution is to have more semiconductors for automobiles."
According to a Bloomberg report, Ford Motor has closed a sports SUV assembly plant in Kentucky last week due to chip shortages, and a small car factory in Germany will also suspend operations for one month; Fiat Chrysler (FCA) has also had to temporarily close its Plants in Mexico and Canada; there may be more production shutdowns in the coming weeks. Not only that, but the executives of Volkswagen, Fiat Chrysler, Toyota and Nissan have all said they have been hit by shortages and have been forced to postpone the production of certain models to keep other plants running.
Investigating the reason for the shortage, it is reported that people are trapped in the indoor world because of the virus, which has spawned strong demand for game systems, personal computers and other electronic products, which in turn attracted a tilt in semiconductor supply, which forced cars around the world Manufacturers are scrambling to buy chips as important as gasoline or steel.
Almost no car manufacturer can survive this wave of chip shortages. Toyota has closed its production lines in China. Fiat Chrysler Automobiles temporarily suspended production at plants in Ontario and Mexico. Volkswagen warned of production problems in factories in China, Europe and the US.
When the Covid-19 hit, automakers cut chip orders due to expected sales decline. At the same time, semiconductor manufacturers have shifted their production lines to meet growing orders for chips used in products such as notebook computers, webcams, tablet computers, and 5G smartphones.
Enterprises have also upgraded their digital infrastructure to handle online meetings and employees working from home, while telecom companies have invested in broadband infrastructure, further driving demand for semiconductors.
Then, car sales rebounded faster than expected at the end of 2020, which caught everyone by surprise. The ensuing shortage of chips is expected to continue until 2021, as it may take six to nine months for semiconductor manufacturers to readjust production.
Dan Hearsch, managing director of consulting firm AlixPartners, said: "The explosive growth of consumer electronics. Everyone and their brothers wanted to buy Xbox, PlayStation and laptops, and the car was discontinued. Then, the car recovered faster than expected. Come on, that’s why you encountered this problem."
Although the chip shortage is not expected to cause a significant increase in car prices, buyers may have to wait longer to get the car they want.
The root cause of the chip shortage lies in the long-term drive to reshape the automotive and semiconductor industries, as well as the short-term chaos brought about by the pandemic.
In the past decade, automakers have increasingly relied on electronic products to increase the attractiveness of their products, adding things such as touch screens, computerized engine controls and gearboxes, built-in cellular and Wi-Fi connections, and collision avoidance using cameras System and other functions, while also adding many other sensors.
Industry analysts and consultants say that a new car may have more than one hundred semiconductors, and even the lack of a single component can trigger production delays or stop production.
German supplier Continental is known for its tires but also produces electronic components. The company called on semiconductor manufacturers to increase production capacity in fabs that produce chips.
Continental said in a statement: "Therefore, future investments in these fabs will be crucial so that the automotive industry can avoid such supply chain turbulence in the future."
Munich-based Infineon said it will increase investment in new capacity in 2021, from 1.1 billion euros in 2020 to 1.5 billion euros (about 1.8 billion US dollars). Austrian Villach will produce 12-inch wafers.
But it will take time for semiconductor manufacturers to catch up. At the same time, PlayStation has priority.

As intelligence has become the development trend of the automotive industry, at present, an average of 50 to 150 chips are used in each car. This "core shortage" problem is undoubtedly a worldwide "disaster".

Although the automobile industry and the industrial chain have formed a century-old layout on a global scale, no matter where the butterfly flaps its wings, it will bring a "hurricane" to the entire industry, but some media and analysis institutions believe that the automobile industry " "The lack of core" is the Chinese market that is most affected.

Analysis agency IHS pointed out that in the first quarter of 2021, car production in Europe, North America, Japan and India will be impacted, but the biggest problem may appear in China. Fulthorpe also said that the impact of chip shortages on the automotive supply chain varies in different markets. However, based on the available information, China’s automotive production capacity is at the greatest risk of interruption in the first quarter of 2021. The affected capacity may be 250,000 vehicles.

However, some analysts believe that China's impact is limited. Chen Wenling, chief economist of the China International Economic Exchange Center, recently responded to the "core shortage" phenomenon in the auto industry, stating that the impact of chip shortages on mid- and low-end cars is relatively limited, and the major impact is mid- and high-end cars. While 90% of high-end automotive chips are concentrated in the United States, Japan and Europe, China's automotive chip industry is only worth more than 2 billion US dollars.

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