Graphical explanation of automotive electronics: MCU and automotive electronics supply tracking

After the "Illustrated New Energy" column, I tried to do some "Illustrated Automotive Electronics" content, also by sorting out all aspects of automotive electronics to track the status of chips and other electronic components.

The main current situations are:

At present, in the global automotive chip supply chain, a small number of automakers have returned to full production, but most automakers are experiencing structural shortages;

From the perspective of chip companies, the supply level will enter a period of relief in 2022, but the chip production capacity in 2023 is indeed basically locked;

From the perspective of consumer electronics chips, the supply of MCUs has begun to exceed demand, and China's current wave of domestic substitution is very powerful.

Since automotive chips are a branch of the entire chip industry, the entire process can be tracked on the road to domestic substitution.

Figure 1 The shortage of automotive chips has caused great trouble to the automotive industry

PART 1: Shortage of automotive electronic chips

From the current perspective, the shortage of automotive semiconductors may continue until at least 2023. Although a few automakers have stated that they have resumed full-load production, chips are still in short supply for most automakers. Therefore, automakers still cannot produce enough cars to meet demand in 2022 and 2023, resulting in continued high prices for most cars. The shortage of automotive chips will hurt the profits of Tier 1 and Tier 2 automakers more than that of automakers - the latter can adjust profits through the price of complete vehicle supply, while it is difficult for parts companies to raise prices.

Figure 2 Basic understanding of major automakers on chip shortages

Automotive chip companies are the big winners in this cycle, but the challenge is that global automotive companies are beginning to realize that controllability in the automotive chip field is very important.

Figure 3: The automotive chip industry’s stance

PART 2: MCU situation

According to a report by Morgan Stanley, MCU demand deteriorated in September, but MCU supply is still increasing and Chinese MCU manufacturers have not cut orders. Due to increased inventory, price cuts are imminent, and if demand does not recover, inventory digestion may continue until the first half of 2023.

The price data of China's MCU channel in September showed that after a sharp drop in August, the price of STMicroelectronics' 32-bit MCU rose by 13% month-on-month to 45 yuan (40 yuan in August). The current spot price is falling to 30-40 yuan, which means that the spot price may still fall in September.

The spot price of GigaDevice's GD32F103VET6 fell 11% month-on-month to 12.5 yuan, from 14 yuan in August and 15.5 yuan in July.

The biggest problem at the moment is that there is no seasonal demand recovery in September, which is usually the month when demand rebounds seasonally due to component inventory from China's Double 11, Black Friday and Christmas sales in Europe and the United States. Currently, demand in the first week of September was interrupted by sporadic circumstances, and we are seeing further weakening of demand in the future, while supply continues to increase.

Chip companies around the world are keeping contract prices flat, and tight supply dynamics are gradually easing.

Chinese suppliers all cut contract prices in the third quarter, but this still failed to boost demand.

The current problem is that dealers are reluctant to stock up due to macro uncertainties.

Figure 4 Basic situation of generalized MCU

In this cycle, unlike Taiwan, China, which cut production in the fourth quarter of 2022:

Domestic Chinese manufacturers are still sourcing wafers, and as more supply enters the market and companies compete for market share, the profitability of Chinese MCU suppliers is under great pressure.

The current spot prices of MCUs from some Chinese manufacturers are already lower than the contract prices. Weak spot prices may force local suppliers to further reduce contract prices in the fourth quarter.

Chinese manufacturers’ MCU channel inventory increased by 4-6 months on average.

The current round of MCU downward cycle will last until the first half of 2023, and the downward cycle is expected to last for three quarters. Spot pricing is a good sentiment indicator. This round of domestic substitution will soon mean a price war.

Summary: I think automotive electronics is actually a branch of electronics (special requirements). The path that has been taken in consumer and industrial electronics will be repeated in automotive electronics.

Figure｜Network and related screenshots

About the author: Zhu Yulong is a senior electric vehicle three-electric system and automotive electronics engineer, and the author of "Automotive Electronic Hardware Design".