Taiwanese Automotive Component Suppliers See End of Tunnel
The auto industry is trying to survive a harsh period. Thankfully, things will get better this year.
Governments have been pushing the car industry for an economic boost post-pandemic. However, wrongly estimated rebounding demands complicated by a semiconductor shortage had disturbed the auto industry, leading carmakers including Volkswagen, Toyota, Honda, Ford and FCA to slash productions in January.
Sanford C. Bernstein predicts a 4.5 million reduction of car production for the upper-half of 2021. Car-parts maker, Continental forecasts auto chip shortfall to be managed in another six to nine months.
How does this impact related Taiwanese players in the making of a car?
First, automotive chip shortage
Since the fourth quarter of 2020, exported cargos had been stranded at ports in Europe and the US affected by the pandemic and deteriorating the shipping container shortage situation in Asia.
This is coupled with soaring freight rates and higher ocean shipping costs, impacting auto OEM and AM lined up to be exported and imports of auto components, leading to slashed car production in a domino effect.
Under the coordination of a handful of governments, Taiwanese semiconductor foundries including TSMC, UMC, VIS and PSMC have agreed to adopt ‘super hot run’ procedures in prioritizing auto chip making to ease off the pressured shortfalls.
Among them, TSMC takes up the majority auto chip OEM market share, taken in the hands of enhanced efficiency and optimized production processes of the 12-inch fab in producing microcontroller units and other automotive controller units, it is hoping to ease off the auto market pressure by the second quarter this year.
IDM firms such as NXP and Renesas have asked for a price rise to carmakers. As a result, automotive chips are seeing a price hike with the highest prediction to reach 15 percentage. The price increase will come in different stages, with the earliest from late February to March, and is likely to attract market capitals.
Car components suppliers are not that lucky, but will eventually rebound
Export-directed OEM car component suppliers are forced to cover heightened ocean shipping price and scramble for cargo spaces, both severely impacting revenue. For example, in face of the urgent calls for components from Tesla, Hota Industrial Mfg Co. had to reschedule other clients’ cargo to prioritize shipments.
Similar issues face AM car component suppliers with freights at hand but shipping remains a hurdle. Tong Yang Industry Co. says AM exporting fees, cargo costs and search of available cargos are laid on the clients’ shoulders, but the hurdle in finding accessible cargos, still leads to stockpiled inventories.
However, the need to restock car components remains for carmakers after stormed by the pandemic halting supplies. IHS predicts the production rate to increase by 14 percentage and sales to increase by 9 percentage after the car industry revives, which will successively pull demands for component inventories and eventually lead to operational growth for automotive component suppliers.
Source: Money Weekly (in Mandarin)
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