80 global factories cut production… When will the semiconductor shortage be resolved?

[MK위클리반도체] The third week of February 2021 literally drove the global automaker industry on a cliff. Even if not, the city of Austin, Texas, started shutting down (temporarily shutting down) the semiconductor factory from the afternoon of the 16th (local time) in the midst of successive car factories closed or cut production due to lack of automotive semiconductors. Power infrastructure instability caused by a record cold wave is the cause. Austin, which is emerging as a semiconductor mecca enough to be called’Silicon Hills’, is densely populated with semiconductor production bases for vehicles such as NXP and Infineon, as well as Samsung Electronics’ consignment manufacturing (Foundry) plant.

On the 19th, KOTRA’s Detroit Trade Center cited the data of’AutoForcast Solution’, an automobile consulting firm, and reported that 85 automobile factories in the world have stopped production for more than one day due to a shortage of semiconductors by the 11th of this month. 23 factories in North America and 26 in Europe were shut down, and in Asia-Pacific, 36 were shut down.

KOTRA explains, “The impact of the shortage of semiconductors on the automobile industry has been fully visible since the end of January.” There are also forecasts for specific production disruptions. IHS Markit predicted that production of about 672,000 vehicles worldwide would decrease in the first quarter of this year. In China alone, it is expected to reduce production by 250,000 units and in North America by more than 100,000 units. Specifically, in North America, Ford, Stellaantis (a merger of Fiat Chrysler Automotive Group and Peugeot Citroen Group), Toyota, and Honda plants have been cut production, and GM shut down three North American plants for more than a week.

The front shutdown of the Austin semiconductor plant was an overkill. Samsung Electronics is mass-producing semiconductor power devices (PMIC) and’Exynos Auto’ semiconductors for vehicle infotainment using 14 nanometers (nm·1 nm is 1 billionth of a meter) process at the Austin plant. Starting from 2019, Tesla Motors’ self-driving chips are also being produced in foundries.

In addition, Freescale, which was acquired by NXP, is mass-producing automotive microcontroller (MCU) semiconductors in Austin. In addition, Cypress, which was acquired by Infineon, designs and manufactures power semiconductors for vehicles there.

NXP, Infineon, Renesas, Texas Instruments (TI), and ST Microelectronics account for most of the global automotive semiconductor supply chain. In particular, NXP, Infineon, and Renesas accounted for 21%, 19%, and 15% of the global automotive semiconductor market as of 2019, respectively, accounting for more than half of the total share of the three companies. Korean companies such as Samsung Electronics and SK Hynix are strong in memory semiconductors installed in vehicle infotainment, but memory accounts for about 7% of all vehicle semiconductors.

Particularly, the component that was selected as the core of this semiconductor shortage situation is MCU. MCU is a semiconductor chip made by embedding an operation processor and memory inside one integrated circuit (IC). Recently, automobiles have been transformed into electronic devices, and are installed in various parts such as powertrains, advanced driver assistance systems (ADAS) and electronic control units (ECUs). Automotive semiconductor companies such as NXP, Renesas, Infineon, and TI outsource large quantities of MCUs. Currently, 70% of the world’s MCU foundry production takes place at the TSMC plant in Taiwan.

Last year, due to the Corona 19, demand for automobiles decreased and production decreased. On the other hand, demand for home appliances, smartphones, servers and clouds, games, and mobile devices surged. The revitalization of the non-face-to-face digital economy has made the overall information technology (IT) field active. Semiconductor manufacturers, including Samsung Electronics and TSMC, first produced semiconductors for IT devices. Moreover, while manufacturing and quality control of automotive semiconductors were much more difficult, the profitability was relatively low, and semiconductor companies were not highly preferred. Excluding Hyundai Motors and Kia, most finished cars cut orders for semiconductors, which is one reason for the current shortage.

Industry opinion is that this situation cannot be resolved until at least the second quarter of this year. KOTRA said, “Generally, semiconductor manufacturing takes 12 to 16 weeks, and in the case of MCU, lead times from 26 to 38 weeks are required.” “It’s a longer state.” At TSMC, it is more difficult to produce semiconductors for vehicles as the factory is in operation 100% just by inundating IT semiconductor orders.

The industry predicts that the long-term shortage of automotive semiconductors will accelerate global supply chain restructuring. First of all, Joe Biden’s US administration plans to implement a comprehensive strategy, including an executive order to overcome the semiconductor supply bottleneck in the near future. In particular, the industry predicts that it will induce the expansion of semiconductor facilities in the US through various incentives including tax benefits. This is an issue that demands not only US semiconductor companies but also local labor.

In the long term, the semiconductor industry is paying attention to the possibility of a reorganization of the division of labor between a design company (fabless) and a foundry. In the 1980s, a Silicon Valley startup semiconductor company developed a fabless model that allied with production partners such as TSMC to reduce the enormous cost of manufacturing semiconductors. However, this incident exposed the structural weaknesses of this model.

KOTRA emphasized, “The shortage of semiconductors for vehicles can be an opportunity to enter a new market.” Currently, semiconductor production bases around the world do not have enough capacity to fully operate even old and outdated lines. In addition, as electric and autonomous vehicles develop, demand for semiconductors for vehicles is expected to increase. According to Infineon and Hana Financial Investment, it is known that semiconductors worth $160 to $180 per vehicle are currently installed in the second-stage autonomous vehicle. However, it is said that the cost of semiconductors per unit of self-driving cars in stages 4-5 is 1150-1250 dollars.

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