Auto makers should pay the price for chip shortage
THE chip shortage in the semiconductor industry is expected to have a more pronounced impact on the automotive industry than on the consumer electronics industry.
According to industry insiders polled by StarBizWeek, this is due to the lower priority given by the semiconductor industry to automakers, as volumes in this segment are much lower.
The apparent global shortage of semiconductor chips appears to continue to worsen. The problem appears to be triggered by fears of the spillover effects of the US-China trade war, which has resulted in the build-up of semiconductor chip stocks.
The initial shortage is now compounded by a variety of factors, including increased demand due to the ongoing Covid-19 pandemic, as people typically buy more desktops, laptops and smart devices to meet their needs. distance working and learning needs.
“It appears to be a perfect storm that hit the industry, compounded by several factors causing the shortage,” QES Group Bhd chief executive and chairman Chew Ne Weng (pictured below) told StarBizWeek.
“Supply chains were also affected in early 2020 when Covid-19 first erupted. This prompted manufacturers to cut back on production. All the big manufacturers have basically cut it down with the expectation that it will be bad enough for at least three quarters or so, ”says Chew.
He says that trade friction between the United States and China then prompted many Chinese tech companies such as Huawei to source and buy all the chips available on the market.
“They bought all of these chips as part of a risk mitigation measure: to reduce supply risks. When they bought a lot, the rest of the players had also (followed suit) and bought a lot too for fear of being the last to get (supplies). This has dramatically increased artificial demand, ”says Chew.
The current shortage has also recently been exacerbated by natural disasters occurring around the same time in various locations involved in the semiconductor supply chain.
It was reported in February 2021 that a winter storm had shut down computer chip manufacturing facilities in Texas, which is the heart of semiconductor manufacturing in the United States.
A prolonged drought, which led to a drought in Taiwan, had also affected the production of semiconductor giants such as Taiwan Semiconductor Manufacturing Co Ltd and Micron Technology Inc, which have significant chipmaking operations in the areas. affected.
Semiconductor manufacturers require a significant amount of water for tasks such as wafer washing and cooling processes in order to maintain their operations.
It was reported yesterday that Taiwan had again received heavy rains. However, the government still maintains its drought alert there and tells the public to continue to conserve water.
Around the same time, various fires also broke out at various semiconductor manufacturing plants in Japan, primarily for the automotive industry.
“All of this has made the shortage worse. For three months, automotive players have been worried because their production has been impacted. Many governments would be concerned because the auto industry has such a big ripple effect on the economy at large, ”Chew said.
“Vehicle manufacturing has so many tier 1, tier 2 and tier 3 peripheral suppliers. It’s very important. So let’s say that the shortage had impacted the production of two million cars. You can multiply the effect of this on the supply chain, assuming a car uses 500 screws. It is a loss of income for the supply chain since they cannot manufacture the car, ”he adds.
Meanwhile, MMS Ventures Bhd CEO Sia Teik Keat told StarBizWeek that semiconductor manufacturers typically prioritize consumer electronics companies for supplies.
“For car manufacturers, they cannot complete the assembly of the car without the IC chip. Priority is usually given to PCs, laptops and smart devices because they have much higher volumes while for automobiles, the volumes are much lower, ”says Sia.
Globetronics Technology Bhd CEO Datuk Heng Huck Lee said the shortages only seem to affect certain segments of the industry and not generally.
Heng says that in his capacity, he doesn’t feel that a shortage is happening on his side.
Intel Corp CEO Pat Gelsinger reportedly said earlier in the week that the global semiconductor shortage could take several years to be resolved.
He attributed the shortage to the sudden surge in demand that strained global supply chains.