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World semiconductor companies are stepping up to raise the price of semiconductors for vehicles one after another. Automotive semiconductors are currently in short supply in the world, and the supply of semiconductors for vehicles is unlikely to increase for a while, which is expected to increase the burden of automobile companies.
According to the Nippon Geizai Newspaper on the 23rd, NXP of the Netherlands, the second and third largest company in the global automotive semiconductor market, Renesas of Japan, and STMicroelectronics, the fifth largest company in the world, have entered into negotiations with trading companies to raise product prices.
According to market researcher IHS Markit, these three companies accounted for more than a quarter of the global automotive semiconductor market in 2019.
Nikkei cited multiple sources and reported that NXP and STMicroelectronics requested a 10-20% increase in semiconductor prices.
Renesas has asked the trading company to increase the price of semiconductors for vehicles, servers, and industrial use, including microcontroller units (MCUs) that control each function of the vehicle. It is reported that Toyota Motor Company’s subsidiary Denso and parts maker Continental, which supplies products to Volkswagen in Germany, have received such notification.
Nikkei analyzed that “each vehicle semiconductor company should raise semiconductor prices due to a sharp increase in the cost of consignment production (foundry) for semiconductors.” Since last year, foundry companies have focused on producing 5G (5G) communication devices or semiconductors for PCs, smartphones and servers instead of semiconductors for vehicles. Since the new coronavirus infection (Corona 19), the demand for automobiles has decreased significantly, and the demand for various electronic devices necessary for working from home has exploded.
The reason why automotive semiconductors have less margin than other semiconductors is why foundry companies are not willing to increase the supply of automotive semiconductors. Although demand for automobiles has recently recovered, it is known that each foundry company still places semiconductors for vehicles as a subordinate priority.
As the supply of automotive semiconductors decreases, global automakers are suffering from disruptions in vehicle production. Some have taken emergency measures, such as shutting down factories and reducing production. On the 18th, Audi postponed production of high-end models and left 10,000 employees on a short break. Audi’s goal is to keep the production decline below 10,000 units in the first quarter of this year. Volkswagen Group, which is affiliated with the Audi brand, predicts that the group’s total car production will decrease by about 100,000 units in the first quarter of this year.
Other companies are similar. Ford closed its Louisville Sports Utility Vehicle (SUV) plant in Kentucky, USA, and the Saarlouis plant in Germany is scheduled to close until the 19th of next month. Fiat Chrysler (FCA) temporarily suspended operations at its Ontario plant in Canada. The Jeep brand’s Mexican plant restarts will also be delayed. Toyota announced plans to cut production at its plant in Texas, USA. Nissan will cut production of one of its flagship models this month, the Note.
When each semiconductor company cuts its price, the burden of operating profit increases on the finished car company. According to Nikkei, if the price of automotive semiconductors increases by 10%, the production cost of automobiles rises by about 0.18%. The operating profit is reduced by about 1%.
In this situation, major automakers have also stepped up political pressure to increase the supply of semiconductors for vehicles. On the 20th, the American Automotive Policy Committee (AAPC), where General Motors (GM), Ford, Fiat Chrysler, and others gathered, asked the US Department of Commerce and Joe Biden’s administration to press Asian semiconductor companies to increase the supply of automotive semiconductors. It is demanded that the semiconductor quotas for electronic products be readjusted to induce each company to redeploy semiconductors for vehicles to some of its production capacity.
Reporter Sun Han-gyeol [email protected]