Auto chip shortage expected to last six months to nine months

The shortage of automotive chips is expected to last six months to nine months, and the problem of mismatch and imbalance between supply and demand will persist, according to Li Shaohua, deputy secretary-general of the China Association of Automobile Manufacturers.

In January 2021, the impact of the shortage of chips was shown in China's decreased auto production, Li said at a recent seminar of the Ministry of Industry and Information Technology.

China's auto production and sales in January were 2.388 million and 2.503 million units, down 15.9% and 11.6%, respectively, from December 2020.

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Excluding data for the years of 2017 and 2020 when Chinese New Year in January saw a significant drop in production compared to the previous month, the drop in auto production in January 2021 compared to the previous month due to the chip shortage was significantly larger than in 2016, 2018 and 2019. Among several factors, chips are one of the most important effects.

The larger the car companies and parts companies in the industry, the greater the degree of impact, Li said, adding that the reason is that large companies have a higher demand for chips, and their own production rhythm is affected to a deeper degree in the case of sudden changes in the original supply cycle.

On how to solve the shortage of automotive chip supply, he suggested that in the short term calming chip prices through a variety of channels to stabilize the market environment.

Li suggested strengthening the information exchange between car companies and chip manufacturers, strengthening the link between supply and demand, and establishing a coordination mechanism between the two industries.

For medium- and long-term recommendations, Li said the layout of the automotive chip industry chain should be improved, a relatively complete industry chain system should be established in the country, and the security level of the industry chain should be improved.

In addition, the tight supply situation of automotive semiconductors since the fourth quarter of last year will continue for quite some time, according to Dong Yang, co-director of the China Automotive Chip Industry Innovation Strategic Alliance, who said at a seminar last Friday.

From the fourth quarter of 2020 to the present, along with the global automotive industry rebound, the automotive semiconductor supply chain has experienced a certain degree of product shortage, and Chinese and foreign automakers have increased their procurement efforts and supply assurance for automotive semiconductors, he added.

China's key automotive semiconductors have long relied on imports, but the size of China's automotive chip industry occupies a global share of about 5%, far below the size of China's automotive industry that occupies a global share of 33%, Dong also said.