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Behind auto chip shortage: Some dealers multiply offers by 10 times

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The year-long global shortage of automotive chips still shows no sign of easing. Demand for cars has recovered, but the chip shortage is causing more and more car companies to cut and shut down production, local media thepaper.cn told the story behind in a report on Tuesday.

Last October, Asahi Kasei Technosystem’s (AKM) chip factory caught fire. By now, the price of automotive chips has risen dozens, if not hundreds, of times.

AKM’s chips became even tighter after the fire, and some distributors took the opportunity to quote prices several times higher, as long as customers could accept them. Chip prices across the industry began to rise, the report said, citing a source at a chip distribution platform.

At this time, AKM’s chips have not yet risen in prices outside China, the distributors then buy chips from abroad at low prices and sell them in China at 20-30 times the price, the source said.

For STMicroelectronics’ products as well, the distributor gradually increased the price three or four times to test the customer’s bottom line.

After this year’s Chinese New Year holiday, chips that cost a few tens of RMB rose to more than RMB 100, then to about RMB 300, and now the price has risen to nearly RMB 1,000.

Distributors’ stock comes from manufacturers’ backlog stock, agents dumping their supply chips, and refurbished or counterfeit chips, the source said.

China does not have a standardized chip trading platform, and transactions between dealers at all levels are complicated, making it difficult to track the flow of stock.

The reason for the rise in auto chip prices is speculation by dealers on the one hand, and automakers spending high prices to buy chips in bulk for fear of discontinuing production on the other, the source said.

If automakers turn back the supply of small amounts and high prices to dealers, then dealers will no longer pay attention to the manufacturer’s subsequent demand, the person said, adding that this is an unaffordable consequence for new energy vehicle companies that need to finance with sales.

STMicroelectronics shut down part of its production line at an assembly plant in Muar, Malaysia, on August 16 and restarted operations on August 18.

A semiconductor supplier’s Muar, Malaysia facility was asked by the local government to shut down part of its production line until August 21 due to the aggravation of the Covid-19 outbreak, said David Xu, executive vice president of Bosch (China) Investment Co, in his WeChat status earlier.

This would result in a direct impact on Bosch ESP/IPB, VCU, TCU and other chips, which were expected to be largely in a state of supply disruption in August to follow, Xu said.

On August 19, Russian automaker GAZ Volga said that three vehicle production lines at its plant in Tolyatti would be suspended from August 23 due to a lack of automotive electronic components.

Earlier Geely Group CEO Jerry Gan Jiayue said the chip shortage, which was affected by Malaysia’s Covid-19, posed a challenge to Geely’s sales and operations in the first half of the year.


This article was first published by Phate Zhang on CnEVPost, a website focusing on new energy vehicle news from China.

SourceCnEVPost
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CnEVPost is a website focused on the coverage of the new energy vehicle industry in China. As with our original intent for CnTechPost, there are a lot of interesting things happening in the Chinese EV industry every day, but they are not covered by the mainstream English language media. We're here to keep track of what's happening in the Chinese EV industry and strive to be the first to publish what we see in English.