Against the backdrop of a global shortage of semiconductors, mainly for automobiles, the governments of Germany, Japan and the United States are requesting assistance from the Taiwanese authorities to increase semiconductor production, among other things. This confirms the tension in semiconductor supply and demand brought about by U.S. sanctions against China and the rapid recovery of the automotive market. If the shortage of semiconductors leads to a long-term reduction in automobile production, it may become a risk factor for the world economy.
Sources close to the Taiwan authorities revealed on January 24 that “there is a worldwide shortage of semiconductors for automobiles, and since the end of last year, requests (for Taiwan to increase semiconductor supply) have been received from diplomatic channels in various countries.” It is said that requests for assistance have been received from Germany, the United States and Japan, which have a large production volume of automobiles. It is rare for countries to request assistance from specific countries and regions to increase production due to a shortage of manufacturing parts.
Taiwan’s Ministry of Economic Affairs, which is in charge of manufacturing, is said to have asked companies with strong semiconductor production capacity to take measures such as increasing production. TSMC (TSMC), the world’s largest semiconductor foundry, and UMC (UMC), the world’s No. 4, have been urged to accelerate measures to increase production of automotive semiconductors.
TSMC’s public relations chief said in an interview with the Nihon Keizai Shimbun on January 24 that responding to demand for automotive semiconductors is a top priority, and that it will continue to work closely with auto-related companies to provide support to meet demand.
Semiconductor shortage has surfaced since the fall of 2020. The shortage of semiconductors for power management used in personal computers first emerged due to the global expansion of Home office as a result of the New Crown Epidemic. As the world’s largest automotive market in China recovers, automotive semiconductors also begin to be in short supply.
The shortage was exacerbated by U.S. sanctions imposed on Semiconductor Manufacturing International Corporation (SMIC), China’s largest semiconductor foundry. SMIC produces semiconductors that are not at the highest end of technology, but are used in large quantities in automotive and home appliance products. Fewer companies produce such semiconductors worldwide, so a large number of production commissions are pouring in from around the world to Taiwanese companies that manufacture semiconductors for a wide range of products from the most sophisticated to general-purpose products.
It is difficult to increase semiconductor production rapidly. The profit margin for automotive semiconductors is small, and there are also risks such as oversupply and rapidly falling prices, which could lead to waste if investment is accelerated to increase production. There is also a trend for each semiconductor company to propose to automotive companies to raise the price of semiconductors by 1 to 2 percent, but the shortage of semiconductors cannot be quickly resolved
The impact spreads to the world FJ Morgan Stanley Securities believes that the scale of production cuts centered on January to June reached about 1.5 million units globally. A senior official of Japan’s Ministry of Economy, Trade and Industry said, “The call for increased production in industries with semiconductor shortages such as automobiles is strong, and the semiconductor shortage continues for at least several months”.
In Japan, Honda is expected to reduce production of small cars such as “Fit” by about 4,000 units in January. In Japan, Nissan has started to reduce the production of its main compact car “Note”. Toyota was forced to compress production capacity in the United States and other places, and Subaru’s Gunma plant also had a shutdown day.
In the field of automotive semiconductors, a fire broke out at an Asahi Kasei plant in Miyazaki Prefecture in October 2020, bringing the supply of some products to a standstill. If the effects of the fire persist in the long term, it is possible that automotive production could be further hit.
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