Chip shortage, Toyota Japan cuts production by another 40%

The global semiconductor supply shortage problem has become increasingly serious since the beginning of 2021. Craig R. Barrett, CEO of Intel in the United States, said when attending the "TechCheck" program broadcast on April 29, 2022: "The problem of insufficient semiconductor supply was previously expected to be solved in 2023. It’s expected to be resolved in 2024.”

However, in mid-2022, the global semiconductor situation has undergone earth-shaking changes. For example, semiconductor supply problems have eased, storage semiconductors such as DRAM and NAND have even experienced oversupply, and prices have begun to plummet. In addition, not only storage semiconductors, but also the shortage of related processors and logic semiconductors is gradually alleviated due to the sluggish shipments of smartphones and PCs.

Judging from the global semiconductor data released by the World Semiconductor Trade Statistics Society (hereinafter referred to as "WSTS"), the shipment amount and quantity of semiconductors began to grow sharply in early 2020, reaching a peak in the second half of 2021 (Peak Out) , and gradually began to decline. (As shown in Figure 1 below)

In addition, the author also calculated the global semiconductor shipment amount every three months and the increase or decrease rate compared with the previous year, as shown in Figure 2 below. The growth and decrease rate cycle of semiconductors is 3 to 5 years, which is the "Silicon Cycle".

For example, the semiconductor market achieved a substantial growth of 52% in August 2008 and was dubbed the "IT bubble". The "IT bubble" burst in 2001, with growth in September of the same year at negative 45%. In addition, due to the "Lehman shock" that occurred in September 2008, the semiconductor market's growth rate was negative 31% in February 2009, and quickly recovered one year later in March 2010, growing again (+60%)!

In addition, thanks to the "storage semiconductor bubble" that occurred in 2016, the global semiconductor market has grown for three consecutive years. Especially during the period from June to August 2017, it achieved a positive growth of 24%! However, after reaching its peak in the autumn of 2018, it fell into the "storage semiconductor crisis", with the growth rate in June 2019 being negative 16%.

In addition, after the outbreak of the new crown epidemic in early 2020, the semiconductor market has grown for three consecutive years. The author calls this demand “special demand due to the new coronavirus epidemic.” During the period from June to December 2021, the growth rate reached more than 30% many times. However, after January 2022, the growth rate began to gradually decline. The growth rate in December 2021 was 30%, and in June 2022 the growth rate fell to 13%.

If the downward trend continues as it is, negative growth will occur as soon as the end of 2022. Semiconductors have fallen into the "Great Depression Era", that is, there is no longer a shortage of semiconductor supply, the market is flooded with semiconductors, and semiconductor prices have plummeted.

If this continues, not only will the problem of insufficient supply of semiconductors be solved, but oversupply may even occur. However, the problem of insufficient supply of automotive semiconductors has not yet been solved. Therefore, automobile manufacturers have to continue to reduce production. Therefore, the author summarized the production status of domestic automobile manufacturers in Japan. (As shown in Figure 3 below)

First of all, from Figure 3 above, we can see that there was a sharp decline in car sales around May 2020. Mainly because of the global outbreak of the COVID-19 epidemic in early 2020, demand for automobiles "evaporated." In short, the world has fallen into a state of "worry about the spread of the new coronavirus epidemic, now is not the time to buy vehicles." Later, the production cuts in the automotive industry gradually eased, but production cuts occurred again in 2021 and lasted until June 2022. The main reason for this production cut was insufficient semiconductor supply.

The production of automobiles shows a cyclical and seasonal trend. For example, March is the "peak season" every year. Therefore, the author excluded seasonal factors and calculated the trend of automobile production reduction. (As shown in Figure 4 below)

First, the author calculated the average monthly vehicle production quantity from 2016 to 2019 (hereinafter referred to as the "average quantity"). The blue line in Figure 4 above is the average quantity; secondly, the author calculated the average quantity on the same chart. A pink line representing the number of automobiles produced from January 2020 to June 2022 is also drawn. The difference between the two polylines is the number of automobile production cuts.

In addition, the author also plotted the production reduction quantity (the difference between the polylines) in the figure below. It can be seen that automobile production began to decline in February 2020, and the maximum production reduction was in May of the same year, which was 409,000 units. . Later, the trend of production reduction became increasingly obvious. In September of the same year, the difference returned to +19,000 units, that is, the impact of the epidemic completely disappeared.

However, after October of the same year (2020), the automobile industry fell into production cuts again. Entering 2021, production is still being reduced. Although there are fluctuations, the overall trend is to reduce production. The number of production cuts in September of the same year was 403,000, almost the same as in May 2020. Later, although the extent of production cuts eased at the end of 2021, after entering 2022, it fell into a "production reduction wave" for the third time, and the extent of production cuts expanded significantly, with monthly production reductions ranging from 140,000 to 300,000 vehicles.

From October 2020 to June 2022, the main reason for the reduction in automobile production is the insufficient supply of semiconductors. So, what type of semiconductor is in short supply?

On August 7, 2022, the Nihon Keizai Shimbun published an article titled "When Will the Semiconductor Supply Insufficiency Problem Be Eased?" The article points out that the problem of insufficient supply of various types of semiconductors is ups and downs and difficult to grasp, but the supply situation of automotive semiconductors is still severe, especially the delivery time of Micro Controller Unit (Microcontroller, referred to as "MCU") and power semiconductor (Lead Time) shows a long-term trend.

According to the above-mentioned article in Nihon Keizai Shimbun, the author made the delivery time of microcontrollers and power semiconductors into Figure 5 below. It can be seen that the delivery time of microcontrollers is showing a long-term trend. The normal delivery time is 6 weeks to 10 weeks (the average is 8 weeks). The delivery time in October 2021 is 16 weeks to 52 weeks (the average is 8 weeks). 28 weeks), February 2022 is 24 weeks to 99 weeks (average 44 weeks), June 2022 is 24 weeks to 66 weeks (average 45 weeks).

On the other hand, the delivery time of power semiconductors is also showing a long-term trend. Under normal circumstances, it is 6 weeks to 10 weeks (the average is 8 weeks). In October 2021, it is 10 weeks to 48 weeks (the average is 29 weeks). ), February 2022 is from 10 Mondays to 60 weeks (the average is 37 weeks), and June 2022 is from 26 Mondays to 61 weeks (the average is 42 weeks). At the June 2022 time point, the average lead time for microcontrollers is 45 weeks and the average lead time for power semiconductors is 42 weeks. Assuming that there are 52 weeks in a year, it can be said that it takes almost a year to obtain microcontrollers and power semiconductors. Therefore, the reason for the large production cuts in the automotive industry today is due to the long lead times of microcontrollers and power semiconductors.

But why are lead times for microcontrollers and power semiconductors getting longer?

On August 3, 2022, Reuters published an article "Perspective Analysis: Insufficient supply of semiconductors and its relationship with automobile manufacturers." The author will briefly introduce this article below.

Mr. Wei Zhejia, the chief executive officer (CEO) of TSMC, the world's largest semiconductor foundry, made it clear at a recent event: "Before the problem of insufficient semiconductor supply arose, no automobile manufacturer asked us to deliver goods as soon as possible. However, In the past two years, we have received frequent calls from automobile manufacturers, just like calls between relatives and friends. Some automobile manufacturers have even offered to deliver 25 wafers as soon as possible, but our usual supply is 25,000 wafers. ".

In response to Mr. CCWei’s speech above, the author noticed the following two points.

(1) Which car manufacturer called the CEO of TSMC?

(2) What is the situation after urgently supplying 25 wafers to automobile manufacturers?

In this regard, the author boldly makes the following predictions.

Who made the call? What happens next?

Who can be the person who can directly call the CEO of TSMC, the world's largest semiconductor foundry? From a common sense perspective, it can only be the CEO of a certain company. But this is not actually the case. It should be a call made by a certain purchasing section chief or purchasing director of a certain automobile manufacturer.

In the automotive industry, there is a "pyramid" with the OEM as the "apex". From the perspective of the OEM, TSMC is a third-tier supplier (Tier3). Therefore, the general manager of the OEM would not call the general manager of a third-tier supplier. It should be the section chief or minister-level figure of the OEM making the call: "Provide micro-control wafers as soon as possible." !

Moreover, under normal circumstances, at least 25,000 microcontroller wafers are delivered, but this time only 25 pieces are delivered. Taking a step back, even if the general manager of an automobile manufacturer directly called and said: "Deliver 25 microcontroller wafers as soon as possible," TSMC's CEO would be shocked by the mere 25 wafers! Finally, the 25 wafers should not be prioritized for production and may be placed at the end of the normal production schedule. Or, it is very likely that there is no chance of production and is simply ignored.

Figure 6 below shows the sales ratio of TSMC’s various semiconductor products. In the second quarter of 2022, High Performance Computing (HPC, high-performance computing) accounted for the largest proportion of TSMC's business, accounting for 43%. Followed by smartphones at 38%, IoT at 8%, and automotive semiconductors accounting for only 5%.

However, there are many types of automotive semiconductors, and the production scale of a single type of product is small (for example, the usual scale is 25,000 wafers, and sometimes 25 wafers are needed). In addition, compared with other semiconductor products, automotive semiconductors have extremely high reliability requirements. All in all, it can be concluded that automotive semiconductors are products with lower profit margins for TSMC. It can be inferred from this that even if TSMC is strongly requested to produce microcontrollers and power semiconductors, TSMC will not produce them.

TSMC is not the only manufacturer capable of producing microcontrollers and power semiconductors, so the above reasons are not all reasons for the extended delivery time. However, the author believes that automobile manufacturers definitely have an extremely arrogant attitude towards second-tier suppliers (Tier2) and third-tier suppliers (Tier3). This results in further extended lead times for microcontrollers and power semiconductors.

Reuters previously published an article titled "Most semiconductor manufacturers believe that automobile manufacturers' inability to understand the structure of the semiconductor supply chain and their unwillingness to share costs and risks are the main reasons for the insufficient supply of automotive semiconductors." Nowadays, everyone has realized that cars cannot be produced without semiconductors. If car manufacturers do not change their attitude towards semiconductor manufacturers, the car industry will face the risk of production cuts in the future.

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