According to the latest report from Nikkei Asia, at the end of September this year, the inventories of some automotive semiconductor chip manufacturers finally showed "dawn", and positive growth occurred. Automotive chip inventories, including Renesas, NXP, Infineon, STMicroelectronics, and Texas Instruments, have shown an upward trend. This is the extremely rare first inventory increase since 2021, which may indicate that the supply of chips in the automotive industry is improving.
According to a public report by Nikkei on November 30, the total inventory of the five chip manufacturers, Renesas Electronics, NXP, Infineon, STMicroelectronics, and Texas Instruments, has increased by 0.7% over the same period last year and is 2021. The first growth in three quarters.
The report pointed out that demand in the automotive market is still strong, but the rebound in inventory indicates that chip manufacturers have achieved results in increasing production, and the tight supply faced by car companies is alleviating. Car dealers have also begun to say that the shortage is alleviating. For example, Continental, as one of the world's largest auto parts suppliers, has stated on the recent earnings conference call, "We believe that the most serious semiconductor shortage period has passed."
However, chip manufacturers have also put forward different opinions, believing that the entire chip inventory supply chain needs more time to recover. NXP’s chief financial officer said on the company’s recent earnings conference call: “We still believe that we need multiple quarters to rebuild our existing inventory and guide the inventory to our long-term target level.”
Since the fourth quarter of last year, chip makers’ sales have soared, while inventory growth has lagged. Due to the difficulty of production to keep up with automakers' demand, inventory levels will continue to deteriorate in the next few quarters. From July to September this year, the situation began to improve. The total inventory of the five chip makers rose 0.7% from the same period last year, the first increase in three quarters.
One of the reasons for the long-lost increase in inventories in September was that many manufacturers stopped production and reduced production due to force majeure in the first half of the year. For example, extreme weather disrupted chip production in Texas, the United States, and restrictions related to the epidemic also hit. Suppliers in Southeast Asia. In addition, a fire at Renesas’ factory in Tokyo also caused production to be interrupted. Due to the need for a lot of relief between the restart of the production line and the delivery of the finished product, it will take some time for manufacturers to restore their original capacity levels.
Another reason for the insufficient capacity of foundry fabs or chip manufacturers is the allocation problem. The early manufacturing end focused on products such as smart phone chips with higher profit margins. Until downstream shortages occurred, more production lines were transferred to manufacturing automotive chips.
At present, many automotive chip manufacturers and their customers have indicated that the third quarter of 2021 will be a turning point. For example, TSMC said in July that it expects that the shortage of automotive chips from July to September will be greatly reduced. And one of the world's largest auto parts suppliers, Continental, also stated on its latest earnings conference call, "We do believe that the worst period of semiconductor shortage has passed."
However, many industry insiders have also pointed out that the risk of further shortages has not completely subsided, and that car companies are currently planning to make up for the production cuts in July-September. Therefore, the demand for chips will remain strong. The chip inventory of the entire supply chain, including component manufacturers and trading companies, will take more time to recover.
However, some observers have not yet become optimistic about auto chip inventories. Although the inventory has improved, the shortage of supply may repeat itself, because automakers are returning to normal production after reducing production at the beginning of this year. Market research company Omdia recently pointed out that the supply shortage may continue until the spring of 2022.
