Image: Reuters Berita 24 English - Kelvin Pang is willing to stake a $23 million paycheck from his tiny office in Singapore that the worst o...
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| Image: Reuters |
Berita 24 English - Kelvin Pang is willing to stake a $23 million paycheck from his tiny office in Singapore that the worst of the chip shortage for automakers is still ahead, at least in China.
Pang purchased 62,000 microcontrollers, which originally cost the German buyer $23.80 each and are chips that help regulate a variety of processes, including the power systems and charging of electric vehicles as well as the engines and transmissions of automobiles.
Now he wants to sell them for $375 each to auto manufacturers in Shenzhen, a Chinese tech powerhouse. He claims to have rejected offers of $100 each, or $6.2 million for the entire package, which is currently packed in a Hong Kong warehouse and small enough to fit in the back seat of a car.
Pang told Reuters that "the automakers have to eat." We have time to wait.
The 58-year-old, who shied away from disclosing the price he purchased for the microcontrollers (MCUs), makes a business by linking Chinese buyers and sellers with surplus electronics inventory that would otherwise be scrapped.
He claims that the recent two-year global chip crisis, which was brought on by pandemic supply disarray and surging demand, has changed what was formerly a high-volume, low-margin trade into one with the possibility for lucrative agreements.
Worldwide automotive chip order delays are still lengthy, but brokers like Pang and thousands of others are concentrating on China because it has become the epicentre of a crisis that the rest of the industry is progressively getting over.
A Reuters examination of 100 automotive chips made by the five major manufacturers found that new orders are typically backed up by nearly a year globally.
Global automakers like General Motors Co., Ford Motor Co., and Nissan Motor Co. have taken steps to improve access in response to the supply crunch, including direct negotiations with chipmakers, paying more per part, and taking more inventory.
However, the picture for China is less optimistic, according to interviews with more than 20 industry participants, including brokers, automakers, suppliers, and CATARC specialists, a government-affiliated auto research agency in China.
China depends nearly exclusively on chips supplied from Europe, the United States, and Taiwan despite being the world's largest automaker and a pioneer in electric vehicles (EVs). The end of a zero-COVID shutdown in Shanghai's auto industry last month has added to supply constraints.
According to CATARC, the China Automotive Technology and Research Center, the scarcity is more severe than elsewhere and poses a threat to slow the country's EV progress. Within the next two to three years, a young domestic chipmaking industry is unlikely to be able to meet demand, the report claims.
Pang, for his part, predicts that China's scarcity would persist through 2023 and believes that keeping supplies after that point would be risky. The one danger, in his opinion, is a more severe economic slump that may lower demand earlier.
PROPHECIES ARE "HARDLY POSSIBLE,"
Each and every conventional and electric vehicle contains thousands of computer chips, also known as semiconductors. They assist in managing anything from navigation and entertainment systems to automatic emergency braking and airbag deployment.
A sampling of chips from Infineon, Texas Instruments, NXP, STMicroelectronics, and Renesas, which serve a variety of purposes in automobiles, were used in the June poll by Reuters.
According to the report, which offers an overview of the global shortfall but not a regional breakdown, new orders placed through distributors are delayed for an average lead time of 49 weeks, or well into 2023. 6 to 198 weeks are the range of lead times.
Infineon, a German chipmaker, told Reuters that while it is "rigorously investing and growing manufacturing facilities worldwide," shortages for chips outsourced to foundries may persist until 2023.
According to a statement from Infineon, "accurate assessments regarding the end of the current shortages are hardly possible right now because the geopolitical and macroeconomic situation has deteriorated in recent months."
Due to decreased demand in other markets, Taiwanese chipmaker United Microelectronics Corp. told Reuters that it had been able to reallocate some capacity to car chips. The corporation stated, "On the whole, it is still difficult for us to match the overall demand from clients.
According to TrendForce analyst Galen Tseng, if auto suppliers needed 100 PMIC chips—which control power from the battery to more than 100 applications in a typical car—they were now only receiving about 80 of them.
NEED CHIPS IMMEDIATELY
Contrasting with the improved supply forecast for global automakers are the tight supply constraints in China. For instance, Volkswagen stated at the end of June that it anticipated the chip shortages to abate in the second half of the year.
Last month, William Li, the chairman of Chinese EV manufacturer Nio, said it was difficult to foresee which chips would be in limited supply. In order to prevent shortages of any of the more than 1,000 chips required to run manufacturing, Nio changes its "risky chip list" on a regular basis.
A Pokemon toy that had also sold out in China was shown in a late May web video in which Chinese EV manufacturer Xpeng Motors begged for chips. The creature, who resembles a bobbing duck, is waving two signs: "urgently seeking" and "chips."
He Xiaopeng, CEO of Xpeng, wrote on Weibo, "As the automobile supply chain progressively recovers, this video illustrates our supply-chain team's current state," adding that his company was having trouble finding the "affordable chips" required to make cars.
EVERY ROAD LEAVES FOR SHENZHEN
According to two people familiar with the trade at a Chinese EV maker and an auto supplier, the search for workarounds has led automakers and suppliers to Shenzhen, China's main chip trading hub, and the "grey market," which brokered supplies legally sold but not authorised by the original manufacturer.
Because chips are occasionally recycled, mislabeled, or inadequately handled, there are risks associated with the grey market.
Masatsune Yamaji, research director at Gartner, stated that brokers were extremely risky and that their costs were ten to twenty times higher. However, because the authorised supply chain is unable to satisfy the consumers, particularly the small customers in automotive or industrial electronics, many chip buyers are currently forced to rely on brokers.
Pang claimed that many of the brokers in Shenzhen were newbies who had been attracted by the price surge but were ignorant of the technology they were buying and selling. "Only the part number is known to them. Do you know what this does in the car? I enquire of them. They are clueless."
Analysts claim that the volume held by brokers is insufficient to meet demand, despite the fact that it is difficult to quantify.
According to Ondrej Burkacky, senior partner at McKinsey, "it's not like all the chips are somewhere buried and you just need to bring them to the market."
Analysts and dealers warned that there could be an asset bubble in the inventory of unsold chips languishing in Shenzhen when supply normalises.
Pang added, "We can't hang on for too long, but the automakers can't either.
Chinese independence
China is spending to lessen its dependency on imported chips because its advanced chip design and manufacture still lag behind those of its competitors abroad. But that won't be simple, especially in light of the strict specifications for auto-grade semiconductors.
According to Li Xudong, senior manager at CATARC, MCUs make up about 30% of the total chip costs in a car but are also the most difficult category for China to achieve self-sufficiency in. Li added that domestic players had only entered the lower end of the market with chips used in air conditioning and seating controls.
Huang Yonghe, head engineer at CATARC, stated in May, "I don't think the problem can be overcome in two to three years." "With 95 percent of the wafers imported, we are dependent on other nations."
According to Li of CATARC, a domestic alternative is emerging in the form of the Chinese EV manufacturer BYD, which has begun to design and produce IGBT transistor chips.
According to Victor Shih, a political science professor at the University of California, San Diego, "China has long viewed its inability to be completely independent on chip manufacture as a key security weakness."
As it did when it made battery production a national priority, China might eventually develop a robust local sector, Shih added.
"It resulted in a great deal of waste and failure, but it also produced two or three giants that now rule the world market."
