[車 반도체 대란]② The precious old semiconductor… We can’t make it, don’t we make it

Input 2021.03.01 06:01

Previous semiconductor supply problems likely to continue until the third quarter
The old semiconductor market entry barrier is high, but the market is small
There is also a prospect that the automobile industry will have its own production capacity.

The shortage of automotive semiconductors is expected to continue until 3 minutes this year. With the production of 1 million units already affected, the damage caused by the shutdown of the factory is expected to accumulate, further intensifying the struggle of the automobile industry.

The semiconductor industry is aiming to normalize supply through production rearrangement without additional equipment input despite the supply-demand imbalance of automobile semiconductors, which adjusted the proportion of production last year. This is because if the production capacity is blindly increased and excess supply occurs in the future, a deficit is inevitable.

It is known that the automotive semiconductor field has a higher entry barrier than other fields, and product development is also difficult. There is also a demand for domestic semiconductor companies to enter the automotive semiconductor business, which suffers from a shortage of supply, but experts say that the automotive semiconductor business is less profitable than the effort and investment made.

However, the governments of each country have begun preparing for the supply and demand of automotive semiconductors. On the other hand, the Korean government has yet to come up with any other measures. Even if the industry solves the supply and demand situation in the short term, there is a possibility that supply and demand problems will arise again in the mid to long term. For this reason, it is also predicted that automakers will have the capacity to produce semiconductors themselves.

◇ Even in the third quarter of the old semiconductor… It is difficult to expand capacity due to oversupply concerns

Market researcher IHS Markit believes that automotive semiconductor supply will not be smooth until the third quarter of this year. The proportion of automotive semiconductors can increase only when semiconductor manufacturing plants rearrange their production proportions and capabilities, and demand for home appliances, smartphones, and PCs decrease.

In order to solve the supply shortage, it is difficult for the semiconductor industry to rapidly expand capacity. This is because there is a concern about oversupply if additional facilities are added. The automobile market is a’congested market’ with a fixed annual sales volume. The automaker industry manages inventory within one month, taking into account the price burden and sensitive semiconductor characteristics. It is not easy for new companies to enter the automotive semiconductor field for a short period of time. The automotive industry is directly connected to safety and has a high entry barrier.

The life span of a car is more than 5 years compared to general electronic devices such as smartphones, so semiconductors installed in cars must also have a certain level of life and durability. In particular, when an internal combustion engine is installed, it must always endure heat above 100°C in the vicinity of the engine. In addition, it also faces an environment where the outside temperature drops below zero. In such a situation, if the semiconductor durability is poor, a major accident may occur due to malfunction while driving.

It seems impossible to solve the supply through a foundry (consignment production of semiconductors). In Taiwan TSMC, which makes 70% of the world’s automotive microcontroller units (MCUs), the proportion of automotive semiconductor sales is not large at 3% as of the fourth quarter of last year. There is no reason to invest in facilities for low sales.

To solve the automotive semiconductor supply shortage, any company must increase its production line for 8-inch wafer processing. This is because most of the main items of automotive semiconductors, such as MCUs and power management chips, are produced in 8-inch wafers. However, the semiconductor industry is negative for the 8-inch business. It is known that 8-inch wafer production semiconductors have relatively lower added value than semiconductors made from 12-inch wafers.

Even if expansion is actively promoted, it is expected that it will take at least 6 months for mass production as of now. Lead time, the time it takes from order to supply, is estimated at a maximum of one year. This is because the process of procuring exposure equipment among semiconductor process equipment takes over six months.

Kim Kyung-min, researcher at Hana Financial Investment, said, “As a supplier of semiconductor fab (factory) equipment, demand for 12-inch extreme ultraviolet (EUV) exposure equipment is focused on TSMC and Samsung Electronics. “It doesn’t seem to be active.”

◇ The market is small, and if there is a problem, it is critical… That’s why Samsung and SK Hynix don’t make it.

When looking at the forecasts of market research companies, automotive semiconductors are forming a market of 40 billion to 45 billion dollars (about 45 to 50 trillion won) as of last year. Last year, the total semiconductor market, as compiled by the World Semiconductor Trade Statistics Organization (WSTS), was $433.1 billion (about 486 trillion won), and automotive semiconductors accounted for around 10%. The market share is very small.

In addition, semiconductors specialized in the automotive field have a complex process. It means that it is impossible to move the factory with only blueprints right away. Some automotive semiconductor design firms leave production to foundries rather than their own, but important semiconductors must be produced directly.

For this reason, existing semiconductor companies are reluctant to use the automotive sector. The risk is high, but the market is small and there is no big profit. In particular, automotive semiconductors are often produced in small quantities of various types. This is because there are so many kinds of semiconductors in a single car.

Typically, dozens of semiconductors go into automobiles, and no company currently makes them all. This is why the overwhelming number 1 in the automotive semiconductor market does not come out. In addition, there are cases in which all top companies differ for each semiconductor by field. Even if memory semiconductor leaders such as Samsung Electronics and SK Hynix enter the automotive semiconductor field, it is almost impossible to dominate the entire market.

The foundries operated by the two companies are also unlikely to actively win orders for automotive semiconductors. This is because automotive semiconductors with low profits are not very attractive in a situation where it is difficult to complete the production of semiconductors in other fields that have already been ordered.

Due to the nature of a car that carries people, it is highly likely to lead to a large-scale dispute if a problem occurs. In particular, if a major safety-related defect is found, tens of thousands of cars must be recalled (free repair). In this case, enormous funds of several trillion won are required.

For this reason, the industry predicts that Samsung Electronics will try to enter the market in the form of mergers and acquisitions (M&A) or a cooperative system instead of alone. Samsung Electronics plans to carry out a meaningful M&A within three years, but the funds are sufficient as it currently has a live cartridge of 104 trillion won.

Companies mentioned as candidates include NXP in the Netherlands, Infineon in Germany, Texas Instruments in the US, and STMicroelectronics in Switzerland. In particular, NXP was mentioned in the candidate several times. Earlier in 2018, Qualcomm failed to acquire NXP for $44 billion (about 49 trillion won). At the time, it is said that NXP also asked Samsung Electronics to negotiate. NXP has major automakers such as BMW, Ford and Toyota as customers.

◇ Operation to secure the old semiconductor… Korea runs in America and Europe

If the supply shortage of automotive semiconductors continues, it is forecast that the semiconductor supply chain may be reorganized. In the case of Joe Biden’s U.S. administration, a comprehensive strategy, including an executive order, will be put into operation in the near future to address the bottleneck of semiconductor supply. The European Union (EU) has decided to promote a high-tech semiconductor manufacturing technology construction project of up to 50 billion euros (approximately 68 trillion won) with Germany and France. The Korean government announced on the 25th of last month that “to support the growth of system semiconductors, we will promote the creation of a total of over 650 billion won.”

It is reported that the government is currently preparing measures to supply and demand automobile semiconductors, centering on the Future Automobile Industry Division and Semiconductor Display Division under the Ministry of Trade, Industry and Energy. However, it is said that it is not a concrete and effective measure, but a dimension to gather ideas. An official from the Ministry of Industry said, “Currently, the supply of semiconductors for automobiles is significant, and in the long run, demand for semiconductors is expected to increase due to eco-friendly vehicles such as hydrogen and electric vehicles, and autonomous vehicles. “I said. The measures by the Ministry of Industry are expected to be prepared around the first half of this year.

The industry points out that the government’s response is too lukewarm in a situation where automobiles, a representative export industry, should be worried about production cuts right away. An industry official said, “The governments of other countries are making tangible plans and preparing countermeasures, but it is an impression that our government is focusing only on mid- to long-term plans because short-term supply and demand is difficult.”

In the future, when the conversion from internal combustion locomotives to eco-friendly electric dynamometers and self-driving cars become common, demand for automotive semiconductors will inevitably increase structurally. In the short term, automakers can visit governments and semiconductor industries to improve supply, but the industry estimates that there will be no major reversal.

In the semiconductor industry, expansion is possible only when automobile semiconductors have secured sufficient profitability compared to other sectors. If not, the supply-demand imbalance can be revived at any time even if the current supply shortage normalizes. If the price of automobile semiconductors rises by 10%, the production cost in automobiles increases by about 0.18%. An industry insider said, “This cost increase would be a significant amount that could reduce the combined operating profit of Hyundai Motor Company and Kia by more than 1%, even if shared by automakers and parts makers.”

To solve this problem, the automotive industry is seeking ways to produce some automotive semiconductors by itself. In the case of Hyundai Mobis, it recently decided to acquire the semiconductor business division of Hyundai Otron, a subsidiary specializing in automotive software and semiconductors within the group, for 133.2 billion won. The Hyundai Otron Semiconductor Business Division is supplying four types of automotive semiconductors: power, drive, sensor, and power to the Hyundai Motor Group.