Chairman of China's largest automaker expects chip shortage to ease in July

Chip shortage is a key factor limiting the capacity of global car companies, but the situation is not far from improving.

Chen Hong, chairman of China's largest automaker SAIC Motor, said Wednesday that the chip shortage problem is expected to ease by late July and will largely return to normal in the third and fourth quarters of this year.

SAIC Motor held its 2020 annual shareholders' meeting on Wednesday, and Chen made these remarks in response to shareholders' questions about the "chip shortage".

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He also said that the automotive industry is experiencing chip shortages for the first time. Previously, automakers and chipmakers were not directly linked until the current dilemma arose.

In fact, in the past month, there have been many analysts began to say that the chip shortage problem is seeing marginal relief. At the same time, the shares of many car companies, including Nio, have also risen sharply in the past month, with Nio up more than 30 percent so far this month.

In a research note earlier this month, top Chinese investment bank CICC said that chip supply bottlenecks dragging down sales performance and earnings pressure due to raw material price hikes are two of the core concerns investors have about the auto industry.

However, the good news is that the team believes that, looking forward, these two major concerns are improving at the margin, and the previous share price correction has been price in the pressure on the performance of car companies.

On the chip supply side, CICC expects it to have an impact on the second-quarter sales of around 200,000 units, less than the first quarter, signaling a marginal improvement in the impact of the chip issue.

Along with the continued easing of chip supply in the third and fourth quarters, China's auto sales are still expected to reach 22 million units for the year, CICC said.

Semiconductor manufacturing giant Taiwan Semiconductor Manufacturing Company (TSMC) will prioritize the supply of automotive chips as well as orders from Apple, DigiTimes said recently, citing sources familiar with the supply chain.

TSMC will solve most of the automotive chip supply shortage problem in the third quarter of this year, and the chip shortage in the automotive market will ease in the second half of 2021, the report said.

In another notable development, Japan's Renesas Electronics Corp said on Friday that capacity at the N3 Building of Naka Factory, which was damaged by a fire in March this year, had been restored to 100 percent of its pre-accident level as of late June 24.

Renesas holds nearly one-third of the global market share for automotive microcontroller chips, and the fire hit global automotive production hard.