A glimpse into the opportunities of domestically produced chips from the "production suspension storm"

Last weekend, a rumor that "Volkswagen stopped production due to chip shortage" quickly swept the entire automotive industry.

"Chips", "production suspension", "bottleneck", the masses who have just experienced the Huawei incident are like frightened birds under the intimidation of such words, and panic spreads like a virus.

After a while, the truth came out. Affected by the epidemic, some overseas chip assembly factories stopped production, resulting in a global chip supply shortage. The impact was more obvious in the communications, mobile phone and other industries. However, the chip shortage problem spread globally, which also led to the inability to produce two major modules, ESP (electronic stability program system) and ECU (electronic control unit), and the automotive industry was affected.

The two major domestic suppliers of the above two modules are Continental and Bosch. There may be a short-term problem in the supply and allocation of chips, but this can be solved quickly. "The inventory data circulated on the Internet is inconsistent with our actual situation. We are currently maintaining very close communication and coordination with many suppliers, and some suppliers have begun to adjust their production capacity." Continental responded to the rumors on the Internet.

Volkswagen, the company that was "suspended from production", also spoke out firmly: "Although the chip supply has been affected, the situation is not as serious as rumored. At present, the customer delivery of the relevant vehicles has not been affected."

Incidents of production suspension or delayed delivery due to the influence of parts suppliers are not unfamiliar in the automotive industry. This has happened to both domestic and luxury brands in recent years. Why has this "chip" storm attracted so much attention from the entire industry?

Chinese cars don't want to be stuck again

Everyone says they don’t want to be strangled, but in fact, Chinese cars can be said to have grown up being strangled. From cars to parts, chips are just one part of it.

This "production suspension" is somewhat accidental, but from another perspective it is a good thing to draw people's attention to automotive semiconductors.

"The chip supply shortage is not a problem for just one company, but also involves upstream raw material issues and the entire industrial chain. There are many types of chips, and there is also a shortage of other types of chips." Infineon, an automotive chip supplier, was even somewhat dismissive of rumors that Volkswagen had stopped production.

Indeed, such a situation is the norm in the chip market. Due to the characteristics of its manufacturing process and long industrial chain, chip procurement is generally carried out 6-9 months in advance. At that time, the global epidemic was raging most rampantly. Most car companies have adopted a conservative attitude towards this year's situation.

The rapid recovery of the domestic economy caught everyone off guard. In other words, the main reason for this turmoil was not the shortage of chips, but the increase in orders. The situation of expedited orders and those who paid to jump the queue was as serious as when buying masks.

Fortunately, chips are high-tech and have limited supply and channels, unlike masks which can be produced by simply pulling up a production line. Otherwise, the current price increase in the chip market would definitely not be as merciful as 5 or 10 points.

11月26日，汽车芯片厂商龙头恩智浦（NXP）涨价函显示：恩智浦向客户表示，新冠疫情的持续影响对商业和贸易市场产生前所未有的影响，恩智浦面临产品严重紧缺问题，同时用于制造这些产品的材料成本的显著增加，双重影响之下，公司决定全线调涨产品价格，以确保能够获得供应的材料和服务，来完成产品的制造销售给客户。

On November 30, Japanese semiconductor manufacturer Renesas Electronics followed suit and issued a price increase notice. Due to the increase in raw material and packaging costs, Renesas Electronics plans to increase the prices of some analog and power products. The price increase will take effect on January 1, 2021.

The raw materials they mentioned are the upstream components - wafers. The problem of insufficient wafer production capacity may not be alleviated until the middle of next year, and the prices of materials, packaging and testing, and terminal chip products will definitely not stop rising for a while. Currently, only terminal consumer products are slightly affected.

Sumco, the world's second largest silicon wafer giant, disclosed in its first quarter report of 2018 that it expects upstream silicon wafer prices to continue to rise in 2018-2019. Based on the negotiation terms of existing customers for 2021 production capacity supply, it is expected that silicon wafers may be in short supply until 2021.

Sumco believes that "the supply growth of 8-inch silicon wafers is relatively limited, and production equipment is not easy to obtain. It is not easy for wafer fabs to expand production capacity for 8-inch silicon wafers. The supply of 8-inch silicon wafers may be in a state of long-term shortage."

For the entire chip industry chain, ECU and ESP involved in the automotive industry are already marginal enough, and "a single move affects the entire body" is undoubtedly the most realistic portrayal of the current global semiconductor industry.

Does "China Chip" still have a chance?

The price hike is not all bad. As far as the current situation is concerned, the news of price hikes by foreign semiconductor manufacturers has undoubtedly brought more opportunities for domestic substitution.

When the terminal manufacturers' demand for chips is greater than the supply of the supply chain, the best way is to expand their supply chain channels and increase the number of manufacturers that can substitute for each other.

In September this year, with the joint support of the Ministry of Science and Technology and the Ministry of Industry and Information Technology, the National New Energy Vehicle Technology Innovation Center (National Innovation Center) led more than 70 enterprises and institutions to establish the "China Automotive Chip Industry Innovation Strategic Alliance", which provided a unified action organization for the field of independent automotive chips and also reflected the country's emphasis on automotive chips.

There are too many data that repeatedly emphasize that the demand for automotive chips will continue to grow explosively in the future. Automotive electronics will become the most important driving force for the growth of the global semiconductor industry in the next few years. Under such a trend, chip autonomy will become the top priority for vehicle manufacturers.

There are two main aspects of the application of chips in automotive electronics. First, sensors such as vehicle ABS (anti-lock braking) systems, vehicle radars, vehicle image sensor systems, and electronic body stability programs all require the use of semiconductor products. Second, with the popularization of electric vehicles and the continuous improvement of vehicle voltage and battery capacity standards, the demand for power managers and discrete power devices (LGBT) will also increase.

In the first half of this year, the domestic automotive chip market was ready to move. The first to sound the clarion call was BAIC. In May this year, BAIC Group announced that it had signed an agreement with Imagination Group and Cuiwei Shares to jointly establish Beijing Coreda Technology Co., Ltd.

It should be emphasized that Imagination is known as a jewel in the crown of British technology. It ranks among the top three in the world in the fields of image processing and semiconductor IP, and shares the world with Qualcomm and Arm. Cuiwei Shares is a Chinese department store giant. It wanted to enter the semiconductor field in 2019 but failed. This time, it just happened to share a piece of the pie with BAIC.

It is understood that the established joint venture will focus on the research and development of autonomous driving chips and language interaction chips. If the research and development goes smoothly, the future products will be introduced into cars of BAIC and other domestic automakers.

After BAIC chose Imagination, Geely Auto directly found Imagination's competitor Arm China and jointly invested in and established CoreEngine Technology. Not long ago, CoreEngine Technology officially debuted in Wuhan, and the official said that in the future it will formulate long-term R&D and mass production plans around chip fields such as autonomous driving, microcontrollers, and smart cockpits.

CoreEngine said, "If the product is mass-produced, it will be supplied to Geely's own cars first. If necessary, it can also be introduced into cars of other competitors."

In addition, in the research and development of semiconductor power devices, as early as 2018, SAIC and Infineon established an automotive IGBT joint venture - SAIC Infineon Automotive Power Semiconductors (Shanghai) Co., Ltd., focusing on the research and development of IGBT.

The most hardcore is BYD, which not only designs its own domestic IGBT, but also builds the first domestic production line. Although its products are still far behind those of giants like Infineon, its strength should not be underestimated. BYD has become the leader of domestic new energy vehicles with its IGBT and batteries, and its stock price has soared.

In the production and manufacturing of upstream wafers, domestic enterprises are not completely useless. At present, domestically produced 4-6 inch silicon wafers can basically meet domestic demand. For example, Yingtang Intelligent Control's subsidiary Yingtang Micro Technology currently has a 6-inch silicon-based wafer production line with a monthly production capacity of about 6,000 wafers, which is mainly used in the production of Yingtang Micro Technology's optoelectronics and automotive chip products.

However, the domestic self-sufficiency rate of 8-inch to 12-inch large silicon wafers is very low, and it is still facing a monopoly by large foreign companies, especially 12-inch large silicon wafers. At present, there are more than 20 12-inch wafer production lines in operation in China, and 8 are announced to be under construction. After completion, the production capacity will exceed 660,000 pieces/month.