Survey of missing cores in cars: the average delivery time is more than 20 weeks and is extended to the third quarter for domestic substitutes. There are these opportunities.

Will there be showers after a long drought? On February 19th, the industry chain news that TSMC agreed to give priority to automobile customers' orders exploded in the industry, although it has not been further confirmed.

At present, there is a global shortage of chips in the whole industry, and the automobile industry is no exception. A few days ago, the Ministry of Industry and Information Technology also discussed and exchanged views with relevant enterprises on the shortage of automotive chips.

Guo Jianwu, founder of Star Vision Capital and international partner of Huisheng International Science and Technology Investment Bank, said in an interview with Science and Technology Innovation Board Daily that smart car chips should be given key support, which solves ecological and industrial problems at the national strategic level. at the same time, it is related to the safety of big data, no matter whether it takes 10 or 20 years.

What is the current shortage of automotive chips? When is it expected to be relieved? Has the opportunity for domestic substitution come? A reporter from Science and Technology Innovation Board Daily conducted research on automotive chip companies, investment institutions and automotive semiconductor researchers in an effort to restore the real situation of automotive chip supply.

The delivery time is generally half a year.

"lack! Obviously, it may not be said that, in fact, the delivery of automotive chips is very tight (of course, other industries are also the same), especially small and medium-sized car enterprises, the pressure is very great. " An insider of one of TSMC's IC design clients confirmed it to Science and Technology Innovation Board Daily.

Since the epidemic in 2020, there has been a shortage of supply in the global semiconductor industry, especially the production capacity gap of 8-inch wafer chips, which has caused an average price increase of about 15-20%. Recently, due to the influence of low temperature weather in Earthquake of Japan and Texas of the United States, the situation has further deteriorated. The tight supply of chips will cause a chain reaction of stopping production or rising prices for downstream automobile and other industries.

"Science and Technology Innovation Board Daily" reporter learned that the current automotive chip industry is mainly Infineon, NXP (NXP), Italian semiconductors, Texas Instruments, Germany Bosch, Microchip (American micro-core technology company) and other overseas leaders. In recent years, consumer electronics chip giants represented by Nvidia, Intel and Qualcomm have also cut into the automotive chip market with car systems and self-driving as breakthroughs. In China, Huawei, BYD Semiconductor and Horizon have come to the fore.

Picture of traditional automotive chip manufacturers; source: founder Securities Research report

Since the end of last year, the above-mentioned leading automotive chip manufacturers have frequently reported the news of extending the window period, issuing price increase notices, and extending the delivery period. Among them, Microchip (American microchip technology company) is the most "exaggerated", with the delivery time of some of its models extended from the previous 18 weeks to 54 weeks, more than a whole year.

According to reports, generally speaking, automobile manufacturers send orders or have stock to the contract factory three months in advance, and the normal standard delivery time is generally 6-8 weeks; at present, the delivery time of major chip manufacturers is generally 20 weeks or more than 30 weeks. This means that some of the Microchip models will even be delivered around 2022 if orders are placed now at least in mid-2021 and beyond.

"56 weeks is not exaggerated, individual types of materials may be like this, it is completely impossible to determine the delivery time, of course, not all materials are like this, but it is an indisputable fact that the delivery time has been greatly extended." The above-mentioned IC design company told Science and Technology Innovation Board Daily.

Looking into the underlying reasons, it is generally mentioned in the industry that the root cause is the poor economic expectations at the beginning of the epidemic in 2020, causing chip manufacturers to reduce their production capacity, while car companies are also relatively conservative in ordering goods, and chip production capacity continues to be tight after the epidemic is rapidly controlled and demand recovers.

In an interview with Science and Technology Innovation Board Daily, Horizon of the Automotive Intelligent Chip Company said that the recent decline in automotive chip production capacity and the rise in prices are mainly due to the general pessimism about the global impact on the epidemic in 2020 and the extremely cautious judgment of downstream consumer demand, so they have not fully issued orders to prepare enough wafers, substrates and other raw materials, and upstream manufacturers do not dare to expand capacity. When the market returns more than expected in the second half of the year, the upstream capacity is far from meeting demand and prices are rising. Due to the shortage of upstream production capacity, suppliers will give priority to the demand for consumer products with large sales, which has an impact on the supply of automotive chips.

It is understood that in order to get the goods, coupled with the agent price speculation, large and small customers multiply the preparation of goods, circulation leads to tight production capacity. It is reported that the plans of car companies at the end of last year have been scheduled for the second quarter of this year, and the production capacity of placing orders this year is even more tight. As mentioned in the price increase letter sent by Microchip in December last year, "We are seeing unprecedented demand for products and services, and the growth rate of outstanding orders in the first and second quarters of 2020 has made it impossible for the company to serve as usual."

From the perspective of industrial development, with the improvement of automobile intelligence, including self-driving, the demand for electric vehicle chips has been increasing sharply since the second half of last year, which aggravates the shortage of automotive chips.

Industry: expected to ease in the third quarter

"there is really no emergency. Biden asked TSMC to expand the production capacity of automotive electronic chips." The IC designer said, "it will take at least two years for the new fab to be put into use, including equipment in place and on-site installation, and the technology is mature."

Automotive industry analyst Zhang Xiang also said that automotive chip manufacturers are strictly in accordance with the plan, and the shortage of automotive chips that broke out at the end of last year can only be allocated to supply and demand through existing production capacity in the short term. In addition, the verification cycle of on-board chips is very long, and it is difficult to increase supply through new production capacity, and the shortage will continue in the short term.

The general response strategy of the original manufacturers of this chip is to give priority to the supply of automotive chips. TSMC said it would halve the delivery time of automotive chips by adjusting its semiconductor production process; UMC said it would increase productivity gains or give priority to the automotive industry; in addition, Samsung is also considering urgently expanding the production capacity of automotive chips. During the interview, some auto chip supply companies also said that in view of the current market situation, they had actively adopted such measures as setting up special working groups, strengthening communication with complete vehicle parts enterprises, starting spare capacity, and speeding up logistics and transportation. enhance market supply capacity.

The Horizon of Automotive Intelligent Chip Company pointed out to Science and Technology Innovation Board Daily that in terms of response measures, automotive intelligent chip companies on the one hand need to predict the intelligent speed increase in vehicles, prepare risk materials in advance according to the expected shipments in 2021, lock in production capacity, on the other hand, actively maintain frequent communication with suppliers in the upper reaches of the industrial chain, and reach a consensus on the importance of self-driving, an extremely fast-growing market. And then raise the priority of production capacity.

Zhang Xiang, an automotive industry analyst, also revealed that "generally, automotive chips account for less than 20% of the business of chip suppliers, and most of the real profits are consumer chips. In the past, it is customary to give priority to meeting the needs of the latter." However, the automotive chip business is relatively stable, and the quality of customers of automobile companies is generally good, in the case of a general shortage of supply, the original chip manufacturers need balance and game at the moment. "

Some industrial changes are also taking place. According to Deloitte, auto parts chips are expected to become the fastest growth point, contributing 12% of chip sales in 2022. From steering wheels to brake sensors, from entertainment systems to reversing images, nearly 40% of car parts require chips. IDC expects the global automotive semiconductor market to be about $31.9 billion in 2020 and about $42.8 billion in 2024.

In view of the shortage of automotive chip production capacity, the industry is generally expected that this situation may continue to the third quarter of this year. "the epidemic situation in foreign countries is gradually improving, and the delivery date will recover one after another, and the lack of cores in cars is expected to be alleviated in the third quarter, but it must have been very tense in recent months." The aforementioned IC design company believes that.

The latest IHS Markit data also show that the global shortage of automotive chips may affect the production of 672000 light vehicles in the first quarter, and the impact of supply shortages may continue into the third quarter.

The Horizon view is similar, saying that "the global shortage of semiconductor chips is expected to continue into the second half of 2021."

Domestic substitutes pay attention to these areas

The epidemic has disrupted the global supply chain, and it is hard to find a "core" in the current automobile market, but new machines are also being nurtured in the crisis. According to the news, the "shortage storm" has increased the demand of automobile customers for the domestic supply chain, and the accelerated development of the domestic automotive chip industry may usher in an opportunity. Relevant chip enterprises actively carry out product certification and speed up the introduction of customers, and import substitution is accelerating.

"there are opportunities for domestic automotive chips, and it is advantageous to introduce relevant customers in the long run." The IC designer said, "however, the impact is not significant in the short term, redesign chip import will also take several months, just the out-of-stock cycle may be over."

According to the industry, automotive chips are relatively special, which are quite different from consumer chips and industrial chips. their technology is more stringent, the production requirements are more stringent, the barriers to entry are extremely high, and the certification of vehicle regulations takes one and a half to two years. It takes another one or two years to take the car factory order for evaluation and testing. The cycle from design to application is relatively long, but once the supply is very stable.

"A car has been developed and fixed, and if you choose a certain car chip supplier, it will be almost impossible to change the supplier during the whole life cycle of the car, so the chip manufacturer will take a long time to place an order. It will take three or four years, but it can basically be in stable supply for five or six years." Zhao Zhanxiang, partner and CTO of Yunxing Capital, introduced it to Science and Technology Innovation Board Daily.

In his view, car manufacturers will be more cautious and conservative in the selection of core chips related to safety, while they will be more aggressive in terms of peripheral chips such as car bodies and entertainment information. "for example, Tesla, the core chip is still good, but it is more inclined to reduce costs on some chips that have nothing to do with security. Domestic chip companies all have opportunities, such as wipers on the car body, car glass, car seats, headlights, entertainment systems and other chips. "

In the interview, many experts also mentioned that the core of the automotive chip field is the intelligent driving or self-driving AI chip, which will have better development opportunities in this innovative field.

"there are also opportunities for smart driving chips in China. At present, the gap between China and foreign countries is not so big. Everyone is on the same starting line. Although the R & D strength of overseas giants is stronger, domestic chip companies respond a little faster. So established chip companies may not necessarily be the first choice." Zhao Zhanxiang talked about.

Photo Gallery Automotive AI Chip manufacturer; Source: founder Securities Research report

Guo Jianwu, founder of Star Vision Capital and international partner of Huisheng International Technology Investment Bank, also said that driverless car chips are a better track, but the coefficient of difficulty is also high. in the future, domestic automotive chip companies still need to do further optimization and exploration in the aspects of architecture, algorithm, computing power, power consumption, and so on.

Objectively speaking, at present, the number of domestic automobile chip enterprises is still small, and they mainly focus on peripheral chips such as car body and automobile infotainment system, and a small number of core chips such as main control and power. According to the industry, the localization rate of China's automotive chips is only a little over 1%, and there is still a lot of room for it.

Which car core enterprises are worth paying attention to?

Zhao Zhanxiang, partner and CTO of Yunxing Capital, told Science and Technology Innovation Board Daily that, "domestic automotive chip companies, in addition to Horizon, Huawei and BYD Semiconductor, are also listed companies with relatively large usage in automobiles. It directly acquired Jiefa Technology to do TPMS tire pressure test system chip, which belongs to the core chip of automotive safety category." Startups include Xinwang microelectronics for automobile-grade MCU, black sesame for self-driving, and smart cockpit chip Xinchi semiconductors, all of which have a certain gold content. "