If Europe and the United States can achieve their respective capacity construction goals, in the irrational competition of repeated construction, production capacity will become excessive again. But before the situation is reversed, car companies still have to endure the situation of continuous increase in demand and weak supply growth.
Author 丨 Huang Yaopeng
Edited 丨tian grass
Produced 丨 Automan Media
After a little half a year of tossing and turning, on February 8, the "European Chips Act" was released.
It can be seen that the EU is really in a hurry this time. Because on March 9, 2021, the European Commission just released the "2030 Digital Compass" plan. In the "compass" planning, the chip is one of the four major "digital infrastructure" projects.
After only 5 months, the EU found that the "lack of core" not only seriously damaged the automotive industry, but also seriously shook the EU's digital competitiveness. The European Union has long been bored and terrified of the wave of digital technology intrusion in the United States, but it has not been able to cultivate software giants.
Europe's global semiconductor market share is declining, and it relies heavily on third-country suppliers, supply chain damage has not been repaired, automotive and industrial chip reserves may be depleted in a matter of weeks, and there is no fundamental improvement in the embarrassing inventory of downstream OEMs.
In 2021, Car sales in Europe (including the Brexit-stricken United Kingdom) have fallen to their worst levels since 1990, and the shortage of semiconductors has caused Tens of billions of dollars in revenue losses for European vehicle companies.
To make matters worse, in the process of the car's march to new energy sources, Europeans were surprised to find that the chip field that originally thought they had the upper hand had no longer been seen.
1
The EU Chip Act, driven by fear
The EU immediately began to brew a special chip industry support bill to try to restore the competitiveness of the EU chip industry in the 1990s before the arrival of 2030.
The bill is long, but the goal is one: to invest 43 billion euros to make the EU's chip production capacity account for 20% of the world's total by 2030.
The current ratio is about 8%. Dutch lithography machine manufacturer Asma said that if nothing is done, EU production capacity will drop to 4% by 2030 because foundries in Asia and the United States are expanding wildly.
With this in mind, the EU would have to quadruple its chip production capacity within eight years to meet the target requirements. Considering the cycle of chip capacity construction, large-scale investment in production capacity will be required in 2025 at the latest. The history of large-scale public technical engineering cooperation in the European Union is a history of delay and ticket jumping.
43 billion euros is now about $49 billion, where did that money come from? The EU allows countries to contribute €30 billion, plus €13 billion in public and private capital. The latter has 11 billion euros of public investment in the "European Chip Project", and 2 billion euros of support for semiconductor start-ups through the EU Chip Fund.
Europeans know very well that no matter how anxious they are, they cannot go directly to the foundry. In the short chip industry chain, Europe has the advantage of design and equipment, and the shortcomings lie in EDA, raw materials, production links and packaging and testing.
To this day, Europe is still the dominant player in the intellectual property of automotive chips. Infineon, NXP and ITL still occupy the forefront of automotive chip design such as MCUs.
Tier 1 suppliers such as Bosch and Continental are downstream buyers, who embed the packaging chips into their own designed substrates and solidify the software they develop to form independent functional modules and sell them to OEMs.
If the chip supply chain is smooth, Europeans will not have to covet the foundry capacity established in Asia. The global semiconductor industry is an interdependent chain, and no country can independently realize the full chain capability from design to application.
Because of the rise of Asian producers led by TSMC, Europeans have chosen to hand over most of their production capacity, especially advanced processes, with a focus on microchip technology. In chip manufacturing equipment, Asma in the Netherlands is the world's only supplier of advanced process equipment.
At first glance, in terms of production capacity, Europe relies on Asia; on the equipment side, Asia depends on Europe.
But in reality, the problem is much more complex. Asma is a system integrator whose products use technology products from almost all Western countries. The result of the deep chimera of the interests and professional capabilities of all parties determines that they must cooperate with each other in order to meet their respective business interests.
However, in recent years, Europe's semiconductor capital expenditure accounts for only 3%-4% of the total global expenditure, and it is no longer an important player. Supporters of semiconductor funding are almost all outside the EU.
In the past two years, political trust between East and West, developed and developing countries has been weakened, which has shaken the entire chip value chain and forced the EU to plan for the worst.
2
The U.S. is also rebuilding chip production capacity
On January 26, the U.S. Department of Commerce released the results of the "Semiconductor Supply Chain Information Consultation Risk Report".
In addition to continuing to warn of inventory, the report also reveals some of the more worrying information: Global semiconductor demand in 2021 is 17% higher than in 2019, but production capacity has increased by only 2%, so that the vast majority of chipmakers have a capacity utilization rate of more than 90%.
This means that there will be no increase in supply without new capacity entry. In fact, the supply of automotive chips in the United States and Europe has declined in 2021. According to this report, automakers around the world have basically no opportunity to replenish chip inventory and receive orders without restrictions.
In 2021, the chip industry set off a big wave of investment, with nearly $150 billion invested, and will slightly exceed $150 billion in 2022; before that, the chip industry investment has never exceeded $115 billion.
These new capacities will not be gradually implemented until around 2024. If the EU's still on-paper planning is not taken into account, Chinese mainland and Taiwan, together accounting for 60% of the new capacity. However, Chinese mainland lack advanced processes. This is not the focus of anxiety in car companies.
The microcontrollers urgently needed by car companies include 40nm, 90nm, 150nm, 180nm and 250nm processes, analog chips include 40nm, 130nm, 160nm, 180nm and 800nm processes, optoelectronic chips include 65nm, 110nm and 180nm processes, which are not advanced processes.
The United States is unabashedly seeking to build its own chip capacity. Intel is promoting two new chip production capacities in Ohio at the same time, with a total investment of $80 billion (in 10 years). Both TSMC and Samsung are following the "urging" of the United States to establish new chip production capacity in Arizona.
This makes the EU wary. This means that Americans should eliminate external influences and establish a chip supply security mechanism.
This is not only a problem of the return of manufacturing, because now the price of labor in the United States has risen to the absurd point, and even the high profits of chip manufacturing cannot be supported. Intel's new capacity provides 3,000 jobs, and front-line production line workers also earn an average annual salary of $135,000, more than double the state average.
The problem is that the U.S. intends to reconstruct the chip value chain on its own, and "cooperation" is no longer the only option for global chips. It is against this double whimsy that the European bill was introduced.
3
How China's role is positioned
Thierry Breton, EU Commissioner for Industry, said: "Without chips, there is no digital transformation, and without digital transformation, there is no technological leadership. Securing the supply of state-of-the-art chips has become an economic and geopolitical priority. ”
Obviously, the EU regards chips as the cornerstone of the security pattern of major countries, which has gone beyond the scope of automotive supply chain security. This tone was heard during the first oil crisis in 1973.
Both the EU and the UNITED States support the development of chip giant "long-chain factories" and claim to develop a framework for "international cooperation and partnership", meaning the two may seek limited cooperation. Japan, as a trusted upstream supplier of raw materials, can continue to stay within this framework; Taiwan, as a downstream foundry, is also relatively stable.
This implicitly reflects the intention to exclude Chinese mainland from participating in the framework of cooperation.
As the largest chip market and an important production link in the whole industry chain, China's influence cannot be shielded. But both the European Union and the United States are trying to prevent China from participating in the rules of the game and to put China in a low-end role in the chip supply chain.
China is clearly not going to sit idly by.
From 2009 to 2020, China issued a series of policies to promote the upgrading of the chip and integrated circuit industry, and before chip awareness gained unprecedented heights, it had already sacrificed trillions of yuan of huge support plans. This alone has crushed Europe and the United States, but China has to make up for many more shortcomings than Europe.
Coincidentally, China is also now focusing on chip production capacity. Both the United States and Europe have vigorously strengthened the autonomy of chip supply chains, which will lead to the inability to allocate resources globally according to optimal principles, and the result is that the economic interests of all participating countries are damaged, thus reproducing the classic "prisoner's dilemma".
At the same time, the demands of all parties in this round of chip production capacity arms race are aimed at covering the entire value chain with their respective capabilities.
Even if they ignore the economic benefits, they will find this very difficult to do. In the end, everyone still has to cooperate, although cooperation is still expressed in the cooperation of enterprises in the automotive industry chain. Governments that reduce restrictions or acquiesce are already considered cooperation. In particular, the era when the United States views China as a geopolitical enemy has only just begun, and it is impossible to openly coordinate policies.
If Europe and the United States can achieve their respective production capacity construction goals, in the irrational race of repeated construction, auto companies may inexplicably benefit in a few years. Because they suddenly find that one day, the capacity has become overcapacity again, and the car companies can regain the good days of low inventory and dumping the financial pressure of stockpiling on suppliers, just as they did before 2019.
This day is likely to come before 2030. But before the situation is reversed, car companies still have to endure the situation of continuous increase in demand and weak supply growth.
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