In recent years, the chip market has not been peaceful, and the chip shortage has become more and more intense since 2020, and there is no obvious sign of improvement so far. Entering 2022, the war between Russia and Ukraine has cast a shadow on the supply of chip raw materials, and the disaster is not alone, on the evening of the 16th, there were successive earthquakes of magnitude 6.0, 7.4 and 5.6 off the east coast of Honshu, Fukushima and Tokyo, power outages in many places, and tsunami warnings in Miyagi and Fukushima. Soon, Renesas Electronics, one of Japan's major semiconductor chip manufacturers, announced that due to the earthquake, the company's three factories in Ibaraki, Gunma and Yamagata prefectures had stopped production. In the future, how will the pattern of the chip industry change?
First, the Russian-Ukrainian conflict, the chip "out of gas"
On February 24, 2022, Russian President Vladimir Putin authorized Russian forces to conduct "special operations" in Ukraine, attacking Ukraine in three ways. At the same time, Ukraine announced the severance of diplomatic relations with Russia, entered a wartime state, and closed its national airspace. Russia's invasion of Ukraine is one of Europe's biggest security crises in decades, hitting the stock prices of tech companies that buy or sell globally.
The reason for this is that more than 90% of the neon used in the U.S. semiconductor industry is supplied by Ukraine, a gas that is critical to the lasers used in the chip manufacturing process. According to market research firm Techcet, neon is a by-product of Russian steel production that is purified in Ukraine. In addition, 35% of the palladium used in the United States comes from Russia. Palladium is used in semiconductors for the manufacture of sensors and memories and as an electroplating material for some packaging technologies. In copper wire bonding technology, to prevent oxidation of copper wire, the copper surface is coated with an inert metal palladium.
Since the purity of neon gas produced in Ukraine reaches 99.99%, only a few companies in the world can do it, and it is difficult to find alternative sources. After Russia annexed Crimea in 2014, the price of neon gas soared by 600%.
40% of the world's krypton gas also comes from Ukraine. Japanese pressurized gas trader Daito Medical Gas Company said that before the outbreak of the Russo-Ukrainian War, krypton gas rose due to supply chain disruptions; krypton gas is generally 200 to 300 yen per liter, and it has risen to nearly 1,000 yen in January this year.
Although semiconductor giants such as ASML, Intel, and Sun Moonlight said that the Russian-Ukrainian conflict "does not need too much to worry about" in the short term, they have learned from events such as the Crimean crisis and the new crown epidemic in 2014 to diversify their supply chains. However, in the medium and long term, the impact of the Russian-Ukrainian conflict will still be there, especially for Chinese manufacturers. In addition to raw materials will also affect China's related industries, the downstream consumer electronics of the chip is also the first to bear the brunt, Russia's process level and output in ordinary civilian consumer electronics products are not high, mainly imports. Russia accounted for 0.2% of global smartphone shipments in 21 years; its largest supplier is Samsung, Russian mobile phone sales account for 3.7% of Samsung's total sales in 21 years, and the second largest mobile phone supplier is Xiaomi. At present, Samsung has stopped supplying smartphones to Russia.
Earlier, U.S. Commerce Secretary Gina Raimondo told The New York Times that Chinese companies that violate U.S. export restrictions on Russia could be cut off from U.S. equipment and software supplies needed to produce products. Earlier, according to Bloomberg, a U.S. official said that any company that uses U.S. products and technologies is subject to a ban on Russia, including Chinese semiconductor and electronics companies. "Looking forward to" SMIC and others to join the sanctions against Russia, in addition, the official also specifically named Lenovo Group and Xiaomi.
Although Russia imports a large number of chips from Europe and the United States, according to the peterson Institute of International Economic Research, China is Russia's most important chip supplier. In 2020, 70% of Russia's supply of chips, computers and smartphones will come from China. At the same time, Russian customs data in 2021 shows that China is also the largest source of chip imports in Russia, accounting for 32.8% of its annual semiconductor imports. And behind these Chinese chips there are still a lot of European and American technology, the United States will not find some kind of excuse to further sanction China in the future, I believe there is a great possibility.
The source country of Russian chip imports
Second, the Japan earthquake, on-board semiconductor "core"
The Earthquake in Japan on the 16th also touched the hearts of people in the semiconductor industry, especially in the automotive-related semiconductor industry. Renesas Electronics, one of Japan's leading semiconductor chip makers, announced that three of its plants in Ibaraki, Gunma, and Yamagata prefectures have stopped production due to the earthquake. The three factories, Nako, Takasaki and Yonezawa, all located near the earthquake zone, are mainly responsible for producing chips for the automotive industry.
Founded in 2010, Renesas Electronics is a new company established by NEC Electronics Corporation and Renesas Technologies Corporation through business integration and a wide range of applications in research, development, design, and manufacturing. Nec Electronics Corporation, a semiconductor subsidiary separated from Nippon Electric in 2002, specialized in semiconductor products and applications, while Renesas Technology was formed in 2003 by the merger of Hitachi Manufacturing and Mitsubishi Electric's Semiconductor Division (excluding semiconductors for power control), making it the world's third-largest semiconductor company at the time, after Intel and Samsung Electronics.
Over the years, Renesas is now a global semiconductor solutions provider and a leading global supplier of microcontrollers, analog power devices, and system-on-chip (SoCs). Products cover microcontrollers (MCUs), microprocessors (MPUs), automotive products, analog devices, clock and timing products, interfaces and connections, memory and logic, power management, RF products, sensor products, etc.
History of Renesas Corporation
Renesas is a major global supplier of chips such as automotive-grade BMS, MCUs, and SoCs. In 2020, Renesas Electronics' revenue was approximately JPY 715.7 billion, of which automotive semiconductors accounted for nearly half. Renesas is also the world's largest supplier of automotive MCUs, with a global market share of 19% in 2020. Renesas Electronics' global market share in the automotive segment of microcontrollers/system-on-chip systems is as follows: 1) ADAS and information: 27%, 2) chassis and safety: 21%, 3) body: 32%, 4) xEV: 28%, and 5) powertrain systems: 33%. In 2019, the company's market share of gold-oxygen half-effect transistors (MOSFETs) was 6.6%, and the market share of insulated gate bipolar transistors (IGBTs) was 4.8%.
Renesas' market share in automotive microcontroller/system-on-chip products
On March 17 and 18, Renesas continuously updated the latest plant conditions. The company said all three plants stopped production immediately after the quake, but some test lines at the Yonezawa plant have resumed operations. Renesas is still evaluating the impact of the quake on its Naka, Yonezawa and Takasaki plants near the epicenter.
Renesas statement after the earthquake
Although the latest news shows that the impact on the three factories seems to be modest and expected to restore pre-earthquake production capacity within a week, auto supply chain companies are still worried. In early 2021, major IDM companies Infineon and NXP were forced to temporarily close their chip factories in Texas due to power outages, exacerbating the shortage of automotive chips at the time.
A fire broke out at Renesas' Naka plant last March, damaging 11 devices, or 2 percent of all semiconductor-produced devices. However, because of this 2% of the devices, the plant stopped production for a month, which eventually caused a direct loss of 17 billion yen, and the world's automobile production decreased by about 1.6 million units from April to June 2021.
Renesas March 2021 Fire Statement
Concerns about the automotive industry chain are not superfluous, as most chipmakers have contracts with existing customers, making it difficult for automakers to find new suppliers, and many have been forced to cut production or stop production due to the recent chip shortage.
Zhi Dongdong believes that the recent Russian-Ukrainian conflict and the Earthquake in Japan are undoubtedly "worse" for the chip industry, although the actual situation may be more "optimistic" than people think, but the uncertain factors are still very large, and what kind of butterfly effect will be caused in the future is still uncertain. However, it is certain that these events may be a "short pain" for China's chip industry, and in the long run, it will still have a lot of positive promotion effects.