General

"It's finally made public," Zhao Siyuan, a chip investor, reposted a piece of news, "The first is TI's agent."

The news that made Zhao Siyuan feel "finally here" is that the State Administration for Market Regulation issued a notice on August 3 stating that in response to prominent issues such as hype and high prices in the automotive chip market, the State Administration for Market Regulation will monitor prices and report clues. Car chip distributors suspected of driving up prices are filed for investigation. The TI in his mouth refers to Texas Instruments, the world's largest supplier of automotive chips.

The regulatory investigation that has been circulating for several months in the industry finally landed, and it quickly produced substantial results. Affected by the news, on August 3, auto chip stocks plunged in the afternoon, Zhaoyi Innovation crashed and stopped, and Silan Micro, Fuman Electronics and other stocks fell.

Regulatory investigations into automotive chips have also attracted overseas attention and are regarded as regulatory signals. "The Wall Street Journal" reported that although China's auto market has suffered less damage, the recent decline in sales has been blamed by the government on a shortage of chips, which are vital to various electronic systems in automobiles. In June, China's passenger car sales ended 11 months of continuous growth, down 5.1% year-on-year.

It is not only the automobile industry that is tossed by the price increase of chips, all hardware, from large household appliances, to every display, graphics card, Bluetooth headset on the production line, and even to the “lack of technology” electronics such as lamps. product.

For them, who hold a large number of orders, they are facing almost the most serious problem of chip supply and difficulty in delivery in history, and the practitioners can't hide their pessimism.

Flying car chip

The automotive industry has suffered the most in this round of lack of cores.

The concentrated outbreak of core shortages in automobiles is the collective misjudgment demand of the industry. At the beginning of the outbreak, the industry had predicted that the entire automobile industry would be greatly negatively affected.

In February 2020, domestic car sales returned to the level of 15 years ago. Based on this, most car companies made conservative estimates of future sales, and then lowered their demand for parts from Tier 1 suppliers. Suppliers turned to upstream chip manufacturers. Depressing demand, the mood of the whole industry is conservative.

However, judging from the current performance, high-end vehicles, especially first-line new energy vehicles, have maintained a relatively good growth rate in terms of scale and profit, and their stress resistance has exceeded expectations. The auto market rebounded rapidly in the second half of 2020, and at this time chip production capacity has been seized by consumer electronics.

“In fact, automotive electronics accounts for 15% of the industry’s production capacity. It’s just that the automotive industry was engaged in zero inventory production in the past few years. When the epidemic was unable to stock up, it began to panic. Moreover, the European automotive industry is a pillar industry. The panic of shortages was amplified by the government. Suppliers took the opportunity to stock up and speculate prices." Zhao Siyuan said.

Automotive chips from Texas Instruments, STMicroelectronics, and NXP are all hot products in the market because they are critical.

"Most cars have at least 40 different chips, and higher-end cars will even use 150. Even if it's only one less, you won't be able to ship it." said Sam Abuelsamid, an automotive analyst at Guidehouse Insights, a market research firm. .

In the more upstream chip manufacturing companies such as TSMC, there is little interest in producing automotive chips. "The automotive industry is precisely the least profitable segment (part) in the chip industry. Therefore, the shortage of chips in the entire industry is in the automotive industry." An industry insider said, "The automotive industry should reflect on inventory management strategies and supplier certification. Strategy, for key components, try to control the destiny in your own hands."

The arbitrary purchasing mode of automobile customers also caused dissatisfaction with the chip manufacturers. Infineon CEO Reinhard Ploss told the Financial Times, "They have to consider (semiconductor industry) a longer lead time of almost half a year."

Infineon is one of the major suppliers of "microcontrollers" (MCUs) and sensors for automotive companies. IC Insights released a report on automotive MCUs on August 11, stating that despite the supply shortage, it still predicts that automotive MCU sales will surge 23% in 2021.

The price of some special MCUs was US$8 each last year, but it has now risen to US$50, which is more than 6 times that of last year. From the perspective of industry insiders, since the (safety) inventory has reached the bottom, the current purchases cannot guarantee the required quantity even if they continue to place orders regardless of the price. "There are many cases where general-purpose MCUs have risen from a few cents to a few dollars. The current market generally increases prices by 8 to 10 times, and everyone is under greater pressure."

The annual orders of an original chip factory are usually planned six months to one year in advance, and the amount of orders for each model and each month is detailed, and the amount of orders required by the downstream will also be communicated with the original factory to a certain extent. While providing agency services, some authorized agents will also provide value-added services on the chip to obtain a certain amount of profit.

Distributor's "power" is out of control

Since the entire chip is in short supply, the chip delivery period is lengthened exponentially, and it is not uncommon for more than half a year.

Chip agents (distributors) are in the middle of the transaction, connecting upstream chip manufacturers and terminal manufacturers at the same time. The two have cooperation, but are also full of contradictions and frictions.

An internal business meeting minutes of a head smartphone chip design company obtained by Jiemian News showed that the company’s research and judgment showed that from a large time scale: supply and demand are balanced, and supply exceeds demand most of the time; prices are Continue to decrease.

"There are almost no successful cases of speculative hoarding. The shortage of the smart phone industry chain is not supported by the surge in actual demand, so this kind of shortage will be revealed sooner or later. If the summer consumer boom does not happen as scheduled, the confidence of device hoarders If it collapses quickly, then the bubble will inevitably burst, and the dull hoarders will then burst their positions.” The company’s CEO said, “History is always similar, otherwise it’s not history.”

The hoarding behavior of some distributors and even the original manufacturers is in his eyes. “Some manufacturers hoarding large-scale goods, especially high-end products, and even mobilizing distributors to assist in the hoarding, are extremely dangerous speculation. Any speculation It is not a business strategy, not a business, but a gambling.” The CEO said.

At present, this judgment is gradually becoming a reality. According to statistics released by the China Academy of Information and Communications Technology, the shipment volume of the mobile phone market in April and May of this year has fallen by more than 30%. Data in June showed that mobile phone shipments continued to decline year-on-year, with a drop of 10%. According to reports, the industry consensus is that the domestic demand for machine replacement is not strong this year, and the machine replacement cycle is still being extended.

"IT Times" reported that not only mobile phone manufacturers are clearing inventories, but the market's demand for flat panels, TVs, consumer electronics, and base stations is not as strong as before. It is likely that the bubble will be crowded by the end of the year. Many people have higher expectations for chip demand than they really are. In the market, "under the false prosperity, selling and hoarding goods is a wise choice for suppliers." The paper said that agents who are hoarding goods are beginning to sell goods because "the actual demand of the terminal is not as large as imagined."

Most practitioners interviewed are cautious and try not to name the upstream.

"In terms of procurement strategy, if the supplier learns that it was originally a secret request, then directly publicly increase the price, which will put more pressure on procurement." An employee of the procurement department of a local auto manufacturer's auto brand said , "We are in urgent demand for production, and the company was not very prosperous at first, and if it gets stuck with chips, it can't be dragged off!"

As the leader of the company that connects the PCBP design and smart hardware ODM of the downstream demander and the upstream chip supplier, Guo Jiangfeng, general manager of Tuli Pulian, has seen too many industrial chaos of supply and demand imbalance: "Suppliers shut down and do not respond to emails." It’s all too common to skip orders, temporarily increase prices, or simply disappear. However, some companies have to buy as much as the price increases, but for those low-value products, some companies simply don’t do it after inquiring the price. NS."

The tension between the upstream and downstream of the industry under the table, with the intervention of supervision, was kicked off by the LED electronic display manufacturer Lanpu Video on August 12 and displayed in front of the public.

Lanpu Video released information on the WeChat public account that it reported that Fuman Electronics was suspected of abusing its dominant market position to monopolize the relevant chip market. At the same time, the company has submitted the "Report Letter Regarding Fuman Electronics Suspected Abusing Market Dominance to Monopolize Related Chip Markets" to the China Optics and Optoelectronics Industry Association and the Anti-Monopoly Bureau of the State Administration for Market Regulation.

Lanpu Video reported that, in recent years, Fuman Electronics and its designated company have been responsible for the supply of integrated circuit IC products required for Lanpu Video’s LED display products. In the past few months of transactions, the informant repeatedly refused to perform the IC product supply contract without justifiable reason, and constantly asked for a price increase, which caused great harm to the informant’s normal business activities and seriously affected the informant’s production schedule , The scheduled fulfillment of follow-up orders and friendly relations with downstream customers have severely squeezed the whistleblower's market survival space.

Once the relevant report information was sent out, it attracted a lot of media and industry attention. The secretary of the board of Fuman Electronics publicly responded that Fuman Electronics and Lanpu Video do not have a direct supply relationship, and the latter mainly obtains goods from agents. Fuman Electronics said: "We and our agents are the supplier relationship. Lanpu Video has repeatedly slandered our company. Now we have to counter suing them for unfair competition and infringing on the company's reputation."

Small and medium-sized enterprises are the biggest victims. Due to the small order quantity, these companies cannot directly place orders with overseas manufacturers, and must use distributors to make them the main payers for counterfeit chips and price increases.

This has stumped small and medium-sized companies that are step-by-step: For small and medium-sized companies that do not have supply chain capabilities, they have a harsh living environment and lack of cores, but they must also beware of counterfeit chips. These buyers who purchase parts from intermediaries and unauthorized distributors may face a more substantial increase in the price of popular parts such as automotive chips.

There are also companies that list the supply chain relationship as competitiveness, specifically mentioning that they did not let "middlemen make the difference." In response to the question of chip procurement on August 11, the Internet of Things Terminal Company, Mobile Communications, stated that the company’s chip procurement model is direct procurement, and there are no distributors. The company’s previous purchases and reserves of some components are lower than the current prices, which is conducive to Company performance improved.

Industry expects changes

In addition to automotive chips, why are other types of chips also "all things lacking"?

Qiao An, an industry analyst at TrendForce, a market research organization, explained that in the first half of last year, various industries were worried about the disconnection, so they kept placing orders and stockings. In the middle of the year, home work and housing economy broke out, and Huawei rushed to implement sanctions in the United States. In addition, last year was the first year of multinational 5G business transformation, and it happened to hit the wave of 5G mobile phone replacement... "wave after wave requires semiconductor production capacity."

The lighting industry in Zhongshan, Guangdong can be regarded as a typical sample of the consumer sector being affected by chip prices.

The ancient town of Zhongshan in Guangdong Province is famous for its LED lighting. The "Lighting Capital of China" gathers 38,000 lighting companies. In the entire cost of LED lights, the proportion of driving lighting chips is not too high, and even a few cents can be done in the past.

However, the switching power supply chips used in LED lights belong to power management ICs, which mainly rely on 8-inch wafer production capacity, which is also the hardest hit area for wafer shortages. Under the tide of rising prices for the "lack of cores", LED-driven lighting chips have also become the easiest part of the production capacity of fabs.

On the demand side, in the first quarter of 2021, Zhongshan's LED output value was 19.17 billion yuan, a record high in the first quarter of the past five years, a sharp increase of 28.4% year-on-year in 2020, and the imbalance of supply and demand for raw materials increased, which also laid the ground for the production of Zhongshan lighting companies. Foreshadowing.

"Without the chip, I received the order and basically couldn't produce it." The boss of a lighting factory said to the outside that in order to solve the chip problem, the company set up a temporary chip team. Looking for a chip, all the relationships that can be used are used.

According to media statistics, the original order volume this year has increased by about 60% compared to usual. However, because of the lack of chips, many lighting manufacturers dare not accept more orders. They would rather sacrifice 20% to 30% of the increase. Order growth is only controlled at 30%-40% higher than usual. s level.

In the long run, chip expansion is an inevitable trend. Both cars and mobile phones require a large supply of chips. The key thrust is that the gradual development of 5G will bring a large amount of chip demand.

In terms of mobile phones alone, the maturity of 5G has brought a new wave of phone replacements. It is expected that the shipments of 5G mobile phones will double in 2021. At the same time, 5G mobile phones far surpass 4G mobile phones in component applications. For example, the consumption of power management chips, radio frequency devices and other devices is 2-3 times that of 4G.

In addition, market growth including notebook computers, home appliances, and base stations has also driven chip demand growth.

Nowadays, the state has taken measures to suppress the phenomenon of driving up the price of automobile chips and hoarding goods. This is a great benefit for domestic automakers, which can ease the tight supply of chips and stabilize prices to a certain extent. At the same time, the chip shortage has also sounded the alarm for China's automobile industry chain. In the process of developing smart cars, it is urgent to speed up independent research and development of chips.

In addition, upstream foundries are also increasing their supply capacity for automotive chips. "We heard that there was a shortage of chips in December last year. In January of this year, we tried every means to squeeze out as many chips as possible for automakers." TSMC Chairman Liu Deyin said in an interview with the media that the minimum requirements of customers can be met by the middle of the year. .

At present, TSMC has notified customers that starting from August, its 12-inch wafer manufacturing services for LCD driver chip suppliers will increase prices by 15% to 20%, which will prompt suppliers to increase chip quotations for end customers.

Some domestic chip agents also said that the volume of goods obtained from international original factories has gradually increased in recent days, the pressure of chip shortages has been slightly eased, and the situation of reselling and driving up prices in the industry has slightly improved.