BYD may place orders for billion-yuan automotive-grade IGBTs from Silan Microelectronics

It is reported that BYD has officially placed an order for automotive-grade IGBTs from Silan Microelectronics, with the order value reaching 100 million yuan. At the same time, an insider said that it is not only Silan Microelectronics that has received the order. Almost all manufacturers that have passed BYD's verification and import, including Star Semiconductor, Times Electric, and China Resources Microelectronics, have received the order. It is not difficult to find that this list includes almost all of the top power device IDM companies in China.

As one of the few automakers with a large-scale layout in the semiconductor field, BYD's semiconductor business extending from its automotive business includes automotive-grade IGBTs, SiC power devices, MCUs and other products. Therefore, it has been less affected than other automakers in the past year or so of automotive chip shortages.

However, BYD's large-scale purchase of IGBTs from external suppliers this time clearly reveals that its own production capacity is unable to meet demand. Insiders revealed two reasons for this: one is that BYD Semiconductor's production capacity is indeed tight, and the other is to reduce transactions between BYD Semiconductor and BYD Group.

Demand surges, BYD's new energy vehicle sales hit new highs

Since June this year, BYD's new energy vehicle sales have continued to rise, and have even maintained a high growth rate of more than 10% month-on-month. In November, BYD's new energy vehicle sales reached 90,121 units, breaking the historical record again, up 252.7% year-on-year and 12.6% month-on-month.

According to Omdia data, in 2020 BYD Semiconductor ranked second among global manufacturers of IGBT modules used in motor control drivers for new energy passenger vehicles in China, second only to Infineon; in the same year, BYD ranked third among domestic manufacturers in sales in the IPM (intelligent power module) field.

In fact, BYD Semiconductor's production capacity is not affected by raw materials, and its capacity utilization rate is also quite high. According to BYD Semiconductor's recently updated IPO filing information, BYD Semiconductor's automotive power module production capacity in the first half of this year was 1.3 million, with an output of 1.1052 million, and a capacity utilization rate of 85.02%. At the same time, with high demand, the production and sales rate is as high as 99.88%, almost one is sold for every one produced.

But even so, it is still unable to meet the surging demand for BYD's new energy vehicle business. According to statistics, in the field of pure electric and high-end hybrid vehicles, the number of IGBT components (not equivalent to the above-mentioned automotive power modules) used in each vehicle can be as high as 90-150.

Chen Gang, chairman and general manager of BYD Semiconductor, said in a speech that data from January to September this year showed that the number of new energy vehicles in China reached 2.1 million, and the production and sales of new energy vehicles in China exceeded 350,000 in February. At this rate, the sales of new energy vehicles this year will reach 3.2 million, and may even reach 5-6 million next year. In addition, compared with fuel vehicles, the semiconductor consumption of new energy vehicles has at least doubled in power devices alone.

Therefore, BYD Semiconductor's current production capacity obviously cannot keep up with the growth rate of the new energy vehicle market.

BYD Semiconductor's IPO is a hurdle that must be overcome as its revenue is highly dependent on BYD Group

According to the prospectus, BYD Group has always been BYD Semiconductor's largest single customer. In 2018, 2019, 2020, and the first half of 2021, BYD Semiconductor's related sales to BYD Group reached 910 million yuan, 600 million yuan, 851 million yuan, and 670 million yuan, respectively, accounting for 67.88%, 54.86%, 59.02%, and 54.24% of revenue, respectively.

At the same time, BYD Semiconductor's power semiconductor product business mainly relies on BYD Group, while other smaller businesses such as optoelectronic semiconductors, control ICs, sensors, etc. come more from external companies.

Therefore, for BYD Semiconductor's listing, related-party transactions are relatively risky. One is the uncertainty of BYD Group's automotive business, and the other is the issue of independence.

Because of the related-party transactions with BYD Group, BYD Semiconductor has almost no advantages over other third-party power semiconductor suppliers, such as Infineon and ST, in the new energy vehicle industry. Because there is a chain of suspicion, BYD's peers in the new energy vehicle field cannot be sure whether BYD Semiconductor will give priority to its related-party transaction companies under special circumstances. And how to ensure that the order information of peers will not be disclosed to the group is also a difficult problem to solve.

Therefore, BYD has started to release IGBT orders to the outside world, which can reduce related transactions with BYD Semiconductor and reduce BYD Group's share of BYD Semiconductor's revenue, paving the way for BYD Semiconductor's listing.

Passenger car market sales fell year-on-year, and the aftereffects of the automotive chip shortage are still there

Data from the China Passenger Car Association this month showed that in November, the domestic broad passenger car market retailed 1.845 million vehicles, a 6.2% increase from the previous month, but a 12.5% ​​decrease from the same period last year.

Cui Dongshu, secretary-general of the China Passenger Car Association, believes that the darkest moment for automotive chip supply in the third quarter has passed. It was originally expected that the improvement in chip supply would prompt production to return to the level of November last year. The actual month-on-month growth was about 14%, but it has not yet returned to last year's level, and the bottleneck factor of opaque supply still exists.

In terms of production, domestic passenger car production in November was 2.229 million units, a month-on-month increase of 13.9%, which also indirectly reflects that production capacity is gradually recovering and the impact of chip shortages on OEMs is gradually easing.

However, the shortage of automotive chips has greatly affected the original chip supply pattern. After GM announced its direct relationship with chip manufacturers and Ford announced its cooperation with wafer foundries, BMW also announced this month that it would directly ally with semiconductor manufacturers.

BMW Group announced that it has signed a chip supply agreement with German chipmaker INOVA Semiconductor and American chipmaker GlobalFoundries. According to the agreement, INOVA and GlobalFoundries guarantee to supply millions of chips to BMW every year.

But even if car companies are working hard to make the supply chain model more transparent, under the trend of new energy vehicles, the chip supply shortage and structural imbalance cannot be eliminated in a short period of time, and the "aftermath" of chip shortage will take some time to adjust.