As soon as the Spring Festival holiday ended, there was a voice in the market, indicating that the IC chip design service will still be in a state of less than demand in the first half of 2022, and the shipment prospects in the second half of the year after the Spring Festival holiday will be more clear.
There have been some previous predictions that the balance of semiconductor supply and demand may be "reversed" by the end of this year, but most IC designers currently believe that the change may not be so fast. According to an incomplete survey by the media, more than half of the IC design companies among the interviewed companies are optimistic about the shipment prospects in the first half of 2022, and point out that there has not been a situation where customers have adjusted their orders due to external forces.
At present, the chips that are in high demand mainly include: 28nm process chips used to build Wi-Fi6/6E chipsets, OLED display driver ICs (DDI) and touch/display integration (TDDI) ICs. It is expected that the market demand for these applications will remain high for a period of time in the next few years, but it is not ruled out that due to the application of more advanced processes, there may be an oversupply of 28nm process products.
According to some optimistic market players, high semiconductor demand will eventually cool, but the process of this evolution will be very long and may take several years to happen. And even if some companies release a large amount of inventory in a short period of time, the resulting volatility will be repaired by the market within the quarter.
However, several companies that expressed optimism about shipments in the second half of 2022 also said that there will be some models that are no longer popular in the future, and only suppliers who provide scarce models can enjoy a brighter future.
Then let's look at the "lack of core" problem that has plagued the automotive industry for a long time. It is reported that in the past two years, there have been some new developments in the automobile manufacturing industry due to the lack of IC components such as chips. According to the latest reports from foreign media, major auto OEMs are currently "resetting" their relationship with chip manufacturers.
A few days ago, Supplyframe, a market research organization that focuses on the supply chain of the electronics industry, said in a media interview. Two years have passed since the supply chain crisis caused by the outbreak of the epidemic, and automotive OEMs are currently facing some new situations.
At the beginning of 2020, China's manufacturing plants were first affected by the epidemic. The first round of manufacturing shutdowns affected the supply chain, and the "end-to-end" buffer inventory accounted for 60% to 70%. This proportion is difficult to catch up. At the same time, the market demand for products has also undergone tremendous changes. Because home office no longer requires vehicles, this part of the production capacity was cancelled by the factory and transferred to manufacturers of entertainment digital products. It is not so much a competition for production capacity between companies, but a competition between industries, and the continuous production restrictions and natural disasters that have occurred since then have exacerbated the intensity of the competition.
The dependence of the automotive industry on electronic components is different from other industries, which is mainly reflected in the update and iteration of products. For example, components such as IoT sensors and semiconductor timing devices may be upgraded once in 9-18 months, while the production of a generation of automobile transmissions may not change in 5-7 years. Therefore, for the automotive industry, the supply chain risk of its electronic components and chip components has become an unforeseen "flying disaster". And this accident has brought about $220 billion in lost sales to the global auto industry, and this impact may continue until 2023.
The research agency said that the global auto industry has spoken out, trying to build closer relationships with semiconductor companies, and it does not rule out the introduction of chip manufacturing in-house, which will be a major shift in business models. Of course, these explorations were made before the outbreak, because in the current era of fierce competition in automobile products, it is possible to define the value of automobiles. Or the digital technology behind the vehicle and the corresponding quality of service, which will make a huge difference in the customer experience.
To this end, some car dealers have already turned their attention to the chip manufacturing process. However, the realization of "core making" is extremely difficult, and it can only be realized when the appropriate investment, appropriate talents, appropriate organizational scale and other elements are available. Some large organizations are strategically establishing ecosystems for chip design and software development, such as electric vehicle manufacturers, and frequently build new cross-border partnerships in the process of platform construction. In short, these actions by automakers were carried out before the epidemic.
Relatively speaking, however, the production volume of automobiles is 1,000 times smaller than that of consumer electronics such as smartphones. In order to prevent supply chain risks, car manufacturers are reluctant to vertically integrate the industry chain, such as designing their own chips in the custom chip process, because such investment has little chance of winning for car manufacturers. Therefore, the central approach can only be achieved through multi-source procurement to ensure key semiconductors and components and reduce supply chain risks. Use standard components wherever possible and source from multiple suppliers, or find suitable replacement components to ensure greater flexibility in manufacturing as market conditions change.
But this approach will undoubtedly give chip companies more say. Taking Tesla as an example, if a certain semiconductor component is critical, then in the co-design process, its design and manufacturer will have more control, whether it is in the chip development process, or the long-term relationship between car dealers and chip companies. In the agreement, this "slant" of the right to speak will be manifested.
Therefore, the "core shortage" crisis brings a bigger proposition, in this context, how should automotive OEMs transform from a fair cooperative relationship with chip manufacturers to a long-term agreement and risk-sharing relationship. This proposition is relatively new to car dealers.
As for the escalation of geopolitical conflicts that the multinational manufacturing industry has been worried about, which will affect the high-tech supply chain, the agency said it is relatively neutral. On the positive side, the U.S.-China tariff dispute is easing, Japan and South Korea have renegotiated bilateral trade agreements, and South America's free trade zone is continuing to stimulate the entry of resources to the region and increase auto production capacity. On the negative side, there are still many new uncertainties in the relationship between major powers, making the manufacturing industry begin to rethink the map of resource allocation.
For example, OEMs are looking at capital expenditures, such as bringing new fab capacity online, or building new fabs, but these strategies will take three to four years to get up and running, not to mention a positive ROI. In addition, the cooperation investment of the foundry is also very rich, which helps to improve the overall situation of the semiconductor market. China and others are also trying to break through restrictions and strengthen domestic infrastructure construction around chipset design, foundry and fab manufacturing technologies.
