In the first half of 2022, the consumer electronics market was impacted by the weakening effect of the stay-at-home economy, the pandemic, international tensions, and high inflation. Coupled with the traditional off-season, demand for related applications such as PCs, laptops, televisions, and smartphones has significantly cooled down, and downstream customers have successively revised down their shipment targets for this year. However, some distributors have indicated that the inventory levels of automotive, industrial control, and communication application products are currently low, maintaining a good demand in the market.

Automotive chip

In the market atmosphere where demand for most products has slowed down, IC design manufacturers point out that automotive chips are still in high demand. Therefore, they have not reduced the amount of wafers they send to foundries so far. Instead, if there are other applications that release capacity due to decreased demand and the manufacturing process is suitable for automotive product production, they will continue to seek capacity support from foundries.

An increasing number of automobile companies have had to suspend production or temporarily halt production due to chip shortages, with delayed deliveries becoming the norm. On June 25th, at the 2022 China Nansha International Integrated Circuit Industry Forum, Zeng Qinghong, Chairman of GAC Group, stated that in the first half of 2022, due to chip shortages and the impact of the pandemic, GAC reduced production by 160,000 vehicles, resulting in a loss of approximately 20 billion yuan in output value. He revealed that in the second quarter, GAC faced a chip shortage of up to 33,000 chips.

According to the latest report from AutoForecastSolutions (AFS), a data forecasting company in the automotive industry, as of July 3, the cumulative reduction in production in the global automotive market this year due to chip shortages is approximately 2.5 million vehicles.
According to AFS, global automakers reduced production by 167,000 vehicles last week due to a shortage of chips. Specifically, the production in Europe was cut by approximately 68,000 vehicles, while that in North America was reduced by about 36,000 vehicles. It is predicted that by the end of this year, global automakers will reduce production by 3.31 million vehicles due to the shortage of chips.

AFS estimates that Europe remains the region with the largest reduction in vehicle production due to chip shortages, with a decrease of 888,000 units. North America's reduction is second only to Europe, at approximately 845,000 units. The reduction in Asia excluding China has increased from 487,000 units to 515,000 units, while the reduction in Chinese Mainland has increased from 107,000 units to 122,000 units.

Ola Kaellenius, CEO of Mercedes-Benz, also stated last week that the global semiconductor shortage is expected to last throughout 2022 and continue into 2023. He said that the semiconductor situation is very severe and will become a challenge for the entire industry this year and next.

On June 29th, the CEO of Mercedes-Benz stated that the global shortage of semiconductor chips for automotive use will persist for an entire year, extending into 2023. The situation in the semiconductor industry is extremely dire, and the sector will continue to face challenges this year and even next.
Netcom chip

Currently, the global shortage of Netcom chips continues, and the chip prices quoted by leading US manufacturers have skyrocketed. Even if customers accept the price increase, they still cannot obtain the chips as scheduled. Despite the recent mixed signals in the smartphone and consumer electronics markets, and some relief from the chip shortage, the global investment in broadband construction and upgrades remains active, and the demand for telecommunications equipment remains robust. The delivery of telecommunications chips is still far away.

According to industry insiders, in the past, telecommunications operators would exclusively use chips from leading US manufacturers, with network communication vendors designing and manufacturing products such as xDSL, fiber optic client devices, IAD integrated access devices, and IP STB set-top boxes. However, recently, some telecommunications customers have become impatient with the price hikes of these leading manufacturers' chips and have demanded that network communication vendors switch to chips from Taiwanese manufacturers like MediaTek and Realtek, rather than continuing to use the original design.

Industry insiders point out that international network communication giants still have long delivery times and place greater emphasis on higher-end enterprise-level products, giving Taiwanese companies an opportunity to capitalize. Since the beginning of this year, there have indeed been reports that some companies, no longer willing to wait for deliveries from international giants, have begun to switch to alternative chip solutions. It is estimated that the earliest delivery date will be in the second half of this year.

In addition, industry insiders revealed that although TSMC and other companies are facing tight supply, they still provide estimated numbers to chip manufacturers. However, top-tier international network communication chip companies only allocate their most beneficial chip production plans at the last minute, and customers such as telecommunications companies only receive notifications at the last moment. According to the analysis of network communication manufacturers, for telecommunications customers, price increases can be tolerated, and long delivery times can also be tolerated. However, without delivery time estimates, when the delivery time arrives, the top-tier international network communication chip companies simply throw up their hands and say "no stock available", which is intolerable! Due to the continuous shortage of network communication chips, the current order fulfillment rate is only 70%. Many second- and third-tier telecommunications customers in Europe and America have had to postpone chip deliveries for one year, greatly delaying the opportunity to expand their markets.
Industrial control chip

Perhaps due to the absence of a star enterprise like Tesla, or perhaps due to being too far away from the general public, the "core disease" in the industrial control field seems to have not attracted much attention. However, in reality, the shortage of cores in industrial control products has been reflected at multiple levels, including the shortage of products such as PLCs, DCSs, and frequency converters. The delivery period for frequency converters has been extended from 4-6 weeks to 16-24 weeks.

Since the second half of 2021, global industrial control brands such as Siemens, Schneider, ABB, Honeywell, Omron, Delta, Emerson, and Mitsubishi have issued price increase notices. Schneider, in particular, stated that due to the shortage of Ethernet chips, it will suspend the sale of related products globally and will not accept orders. This shows that the chip shortage has already affected leading enterprises in the industrial control field. If this issue is not resolved, the impact of the chip shortage on the industrial sector will become even more severe.

According to industry insiders, since July 1st this year, industrial control manufacturers such as SICK, Festo, Pilz, Meanwell, and Yokogawa have initiated a new round of price hikes, with the highest increase exceeding 20%! The reasons for the price hikes are invariably due to the shortage and continuous price increases of core industrial control chips, as well as the sustained rise in prices of commodities, labor, transportation, and other aspects. Particular emphasis has been placed on the price hikes and shortages of chips.

In the industrial control MCU market, the lead time under normal circumstances is generally around 14-20 weeks. According to statistics, its supply cycle has gradually lengthened since 2020Q2, which is still within a controllable range compared to automotive products, and the market is still accepting it. However, since 2021Q4, the lead times of major players such as TI, Renesas, NXP, ST, and Infineon have further lengthened. By 2022Q1, the longest lead time for some industrial control products exceeded 52 weeks, leading to a significant increase in spot market prices.

In terms of industrial control analog devices, they are also one of the "leading" products that have been in short supply recently. Under normal circumstances, the delivery time is generally concentrated between 12-20 weeks. Among them, Diodes, Infineon, Microchip, ST, and Avago have seen particularly severe increases, with some products having a maximum delivery time of up to 52 weeks.