How long can China's chip "supply chain" last? The status quo of chips basically relying on imports is worrying

There is a global shortage of automotive chips, and China's key chips in the automotive industry are basically imported. The picture shows the workshop of Dongfeng Honda Automobile Factory in Wuhan on April 15, 2021.

The key chips of China's automotive industry are basically dependent on imports, and the risk of import channels has a "fatal impact" on the national economy. In addition, China's chip dependence on imports is serious, and the phenomenon of dealers hoarding chips is common.

How long can the "supply chain" relying on imported chips last?

Chips are also often referred to as integrated circuits, referring to silicon wafers containing integrated circuits. China introduced a new policy in August 2020 to provide support for the chip industry in taxation, investment and financing, research and development and other aspects. On December 7 this year, people's daily said that the production capacity of integrated circuits increased by 40.2% from January to October 2021.

What is China's strength in chip manufacturing? On November 23, Xinhua News Agency reported that China's automotive chips are mostly used in simple systems such as body electronics, while key system chips such as advanced sensors, in-vehicle networks, three-electric systems, chassis electronic control, ADAS (advanced driver assistance systems), and automatic driving are basically all imported. The report also said: "With the increasing complexity of global economic cooperation, the risk of import channels has a fatal impact on the automobile industry and the national economy." ”

Ye Shengji, chief engineer and deputy secretary-general of the China Association of Automobile Manufacturers, disclosed at the 2021 China Automotive Forum (June 17-19): As of now, China's semiconductor self-sufficiency rate is 15%, of which the self-sufficiency rate of automotive chips is less than 5%.

China's chip high demand imports have always been there

Automotive chips are important components of the automobile manufacturing industry, from the perspective of application, small to the automobile tire pressure monitoring system, camera, large to the vehicle controller, automatic driving domain controller, etc. are inseparable from the chip. An ordinary car needs more than 200 chips, and new energy vehicles need at least 500.

The "Research Report on China's Automotive Industry" released by data information company EMIS (Q3 2021) showed strong performance in China's new energy vehicle market in the second quarter. Among them, the sales of pure electric vehicles were 562,000 units, up 183.8% year-on-year, and the sales of plug-in hybrid vehicles were 118,000 units, up 99.7% year-on-year. China's new energy vehicle production capacity has expanded, so the demand for chips has continued to rise.

According to the "National Import Key Commodity Quantity Table (USD Value) for November 2021" released by the General Administration of Customs on December 7, as of November, the number of chips, diodes and similar semiconductor devices imported by China this year increased by 19.3% and 39.8% year-on-year.

China's chip distributors "hoard a large number of chips"

In order to seek higher profits in the context of tight global chip supply, the phenomenon of chip dealers hoarding chips in China has become more common.

Li Shaohua, deputy secretary-general of the China Automobile Association and director of the Industry Development Department, said in an exclusive interview with China Automotive Pictorial in April this year: "Due to price-driven reasons, chip distributors have hoarded a large number of chips, including WeChat public accounts, Ali trading platforms and other channels, chips can be seen being sold. "At present, chip resources are more hoarded in the distribution link."

He also said that because the proportion of chips in the total price of cars is not very high, only a few thousand yuan, so (Chinese) car companies and parts companies are willing to clean up the spot at any cost to solve the problem, so as to increase market share. For the consequences of such a "sweeping of goods", Li Shaohua believes that it has "further promoted the distribution of hoarded goods".

Li Shaohua told the Securities Daily reporter on September 10: "The production and sales of automobiles in the next few months are completely dependent on the supply of chips. ”

However, according to the National Business Daily in October, Yuan Chengyin, general manager of China's National New Energy Vehicle Technology Innovation Center, said: "There are many factors affecting the supply of chips, and the hoarding in the supply chain is only one of the small factors." Yuan Chengyin is also the secretary general of China's automotive chip industry innovation strategic alliance.

Yuan Chengyin said that in China, "the hoarding behavior of the supply chain does exist." The report disclosed: In July this year, a brand car company purchased 2,000 automotive IC chips at a time for 20 million yuan (about 3.2 million US dollars) in the Huaqiangbei electronics market, with an average of 10,000 yuan (about 1,600 US dollars) per IC chip, breaking Huaqiangbei's sales record at that time. However, the car company subsequently denied that there was such a thing.

The report also disclosed: "You never know how much the owner of huaqiang north counter has in stock." This kind of 'sweeping goods' is basically the first payment and then shipping, and the premium situation is directly linked to the specific model of the product and the degree of stock shortage. ”

Huaqiang North Electronics Market, located in Futian District, Shenzhen, is the largest electronics market in China and the world's largest component distribution center. Shenzhen is close to Hong Kong. China's science and technology innovation and entrepreneurship comprehensive service company "36Kr" research report on the market in September this year, revealing more chip distribution chaos and unspoken rules.

According to the report, some people smuggle chips through speedboats, shuttling between the docks in Shenzhen and Hong Kong; as long as dealers see that the supply of raw materials upstream of the chips has not yet been restored, or natural disasters occur in factories, the delivery cycle announced on the official website will be extended, and they will automatically hoard goods and speculate in prices. In addition, once the dealer finds that only he has a certain chip in stock on the market, he will immediately stop shipping, hoard it, and wait for the chip to be sold at a good price.

How long can "unique scenery" last?

Liu Deyin, chairman of TSMC, a leading chip foundry company, was interviewed by time (TIME) in the United States on October 1, and bluntly said that there must be people in the supply chain hoarding chips on the shortage of global automotive chips. He mentioned that in order to solve the chip shortage problem, the TSMC team repeatedly checked different data to understand which customers really needed it and which customers were hoarding goods. "We're also learning because we didn't need to do that before," he said. ”

The global automotive chip famine has affected Germany, Japan and the United States, the top three auto exporters in 2020.

According to the October trade data released by The Japanese Ministry of Finance on November 26, the number of sales of ordinary car exports worldwide fell by 35.7% year-on-year, the amount fell by 40.9% year-on-year, and the amount of export sales, including buses and trucks, fell by 36.7% year-on-year. According to Reuters, market analysts at Mizuho Securities say the chip shortage will continue at least until the end of the year, and no one knows whether [Japanese] automakers will be able to adjust their supply chains to solve the chip shortage.

According to information released by the German Federal Statistical Office on November 29, the export sales of passenger cars in the third quarter of 2021 fell by 17.2% year-on-year due to chip supply shortages and poor freight. U.S. auto export sales fell 2.0 percent year-over-year in September and 0.4 percent in October.

China's automobile exports are growing against the trend, and the statistical bulletin released by the General Administration of Customs on December 7 shows that from January to November this year, the cumulative export of automobiles (including chassis) was 1.928 million units, an increase of 101.9% year-on-year, and the sales amount increased by 124.3% year-on-year. The China Association of Automobile Manufacturers released vehicle export data as follows: From January to November, automobile companies exported 1.793 million vehicles, an increase of 1.1 times year-on-year. Among them, passenger car exports were 1.427 million units, an increase of 1.2 times year-on-year, and commercial vehicle exports were 366,000 units, an increase of 77.0% year-on-year.

"China Automobile Pictorial" published an article at the end of October, saying that China's automobile exports in the global chip famine are "unique scenery".

But how long can the "advantage" of relying on imports and hoarding last?