Commodity Chips Market Implications as Auto Demands Reallocation
After response to international pressure, the largest foundries could be changing their production capacity to save the faltering automotive industry.
After a rocky year in 2020, consumer demand started to rebound with increased interest in electric vehicles (EV) and personal automobiles in the face of ongoing COVID-19 travel preferences. However, the electronics industry is currently facing several shortages, which delayed production for multiple car manufacturers. Since the beginning of 2021, already GM, Toyota and Hyundai have reported plant closures while production lines stood still, waiting for ICs.
The pressure to save the automotive industry has risen to the highest ranks, with global leaders like the German Minister of the Economy and Present Biden’s cabinet making calls to IC leaders like TSMC and UMC for reallocation to support struggling auto manufacturers on their soil.
While the pivot would revive a corner of the economy that has yet to find relief after pandemic initially struck, the implications would be felt in other sectors as the global IC shortages worsens. Currently, foundries producing the common chips are already operating at 100% capacity, resulting in reallocation of existing capacity.
The demand for automotive ICs is greatest for special purpose logic ICs and application-specific analog devices. As a result, production reallocation is likely to directly affect industrial, commercial, and medical applications.
For end consumers, smartphones and 5G applications are already starting to feel the pinch. Qualcomm, the leading manufacturer of chips for smartphones, reports that the shortage of integrated circuits is already extending lead times and impeding production for new phones, which would only worsen once the reallocation goes into effect.
In the work from home economy, monitors, notebooks, laptops, and PCs will also see extended lead times. ICs already in short are disrupting fulfillment, meaning additional delays are inevitable.