The industry has regained its manufacturing pace, but
potential disruptions in chip supply remain, and production
momentum disruption has pushed a 100-million-unit year into the
next decade.
The impact of the COVID-19 pandemic on the availability of
semiconductor chips took a drastic toll on all facets of the
automotive industry, and in turn the global economy. But in
mid-2023, the worst of the fallout seems to have settled, and the
auto industry has found a new normal. In short, the dearth of
supply of semiconductor chips that hobbled vehicle production for
most of 2021 and 2022 has faded into the background — with some
exceptions — according to recent analysis by S&P Global
Mobility.
S&P Global Mobility estimates that in 2021 more than 9.5
million units of global light-vehicle production was lost as a
direct result of a lack of necessary semiconductors, with the third
quarter of 2021 experiencing the largest impact with an estimated
volume loss of 3.5 million units. Another 3 million units were
impacted in 2022. (These losses are estimated from analyzing
original equipment manufacturer announcements, compared to S&P
Global Mobility’s estimate of production planning volumes during
the same <span/>timeframes.)
During the first half of 2023, however, losses identifiable as
specifically related to the semiconductor shortage fell to about
524,000 units globally. Although the supply of semiconductors
remains constrained, more predictable availability has allowed
automakers to adapt their production schedules.
As a result, we see semiconductors as a specific cause of
production disruptions happening with less frequency.
Production in 2023 has improved as automakers and suppliers have
adapted to the current environment, and 2023 sales are improving
with more inventory. That said, the pre-pandemic momentum toward a
100-million global vehicle production year has been set back by a
decade, according to S&P Global Mobility analysis.
So, where are we in mid-2023?
To level-set expectations, prior to the pandemic there always
were semiconductor supply chain challenges — but they tended to
be episodic, impacting a single component type or individual
supplier<span/>. The
semiconductor suppliers have customer service and production
readiness teams working behind the scenes, and these resources have
always managed these types of shortages with only rare
interruptions in service.
What was unique about the pandemic period was the wholesale
shortages among <span/>virtually all suppliers,
impacting multiple component types (including microcontroller units
— or MCUs — and analog based on mature process node
capacity).
“We’ve moved from obvious disruption, clearly visible at the
automaker and plant level, to a stage where we know constraint
remains, but it is impossible to identify,” said Mark Fulthorpe,
S&P Global Mobility executive director of global light-vehicle
production.
“We are now in a position where the auto industry has adapted to
a constrained supply, and as a result is much less likely to be hit
by significant disruption,” Fulthorpe added. “With the current
semiconductor supply levels, we estimate that 22 million units of
global light-vehicle production per quarter could be
supported.”
However, industry demand for increasingly complex infotainment,
advanced safety and vehicle autonomy systems will continue to
escalate usage of semiconductors in vehicles. Phil Amsrud, senior
principal analyst in the S&P Global Mobility supplier and
components team, estimates that the value of semiconductors
installed in vehicles averaged US$500 per car in 2020, but is
forecast to reach US$1,400 per car by 2028.
“Before the pandemic, the lead time from order to shipment of
chips was three to four months. During the pandemic in 2021 and
2022, that wait grew to a year or longer,” Amsrud said. “But while
other industries — such as mobile phones and <span/>PCs — have
experienced cooling demand of late,
automotive semiconductor demand is increasing, and some chip
manufacturers have pivoted capacity to address that need.”
That said, the types of chips for automotive-grade use versus
communications equipment often are not the same; or there are
different qualification levels in automotive that complicate using
consumer grade components in automotive applications, Amsrud
noted.
Potential for future disruption
Although the semiconductor crisis is <span/>largely resolved, the chip supply
situation still carries a degree of uncertainty. Demand still
exceeds supply of several chip types. There is a shortage, even as
the auto industry can better manage it today than two years ago.
Pressure on the supply chain remains with <span/>risk of further disruption.
While demand for chips from the consumer electronics industry
has softened recently, it is likely to rebound while the use of
semiconductors in autos continues to increase, which are factors
indicating continued pressure. Meanwhile, the structural lack of
capacity for mature node capacity has not been addressed.
Geopolitical trade risks remain as well, as evidenced by mainland
China’s decision in early July to restrict exports of some key
semiconductor materials. Trade tensions between the <span/>US and mainland China
remain high, and the semiconductor supply can still be affected by
future moves from either side.
Consolidation of electronics in cars is also driving the
automotive semiconductor demand, with
domain controllers and central computers replacing electronics
control units (ECUs). This does not lessen the need for chips,
but rather means more — and more powerful — chips are
needed.
The good news is this consolidation enables the use of more
advanced system-on-chip (SoC) and discrete memory, which are
processed at more advanced process nodes. This is where most
capacity investment is going. The <span/>bad news is some analog, discrete and
power components will always be on mature process nodes, which
receive much less investment. The movement to domain controllers
and central computers may reduce the number of modules per vehicle
and will change the mix of semiconductors but it will not reduce
the overall number of semiconductors. Analog, discrete and power
devices will get little if any benefit from moving to advanced
process nodes.
There also is the question of how <span/>OEMs approach the manufacturing capacity
equation, following two years of lower volumes but — in some
cases — stronger profits. Faced with lower capacity, <span/>largely due to the chip
crisis, automakers were able to command higher pricing, heavily
reduce reliance on incentives, and allocate chips to higher-margin
products and trim levels within product lines.
For those automakers, there may be a rethink on how to manage
the inventory versus demand, and incentive to support the pricing
power with managed production and to continue allocating chips to
high-margin, high-feature set vehicles that inherently also require
more chips. <span/>Looking
forward, the question may not simply be how many chips are
available to the automotive industry, but how different automakers
allocate their supply.
Industry trajectory set back by a decade
While production and sales are improving, and semiconductor
supply is no longer expected to be a source of disruption for
vehicle production, there is little chance to “make up” the lost
production or sales from 2020 through 2022. The early-2019 S&P
Global Mobility forecast — issued prior to the COVID-19
pandemic and the subsequent shutdowns — expected both global
sales and production to exceed 100 million units annually as soon
as 2022.
That milestone is now not expected until past 2030, according to
our analysis, demonstrating that the auto industry’s growth
trajectory has been thrown off by <span/>roughly a decade compared with
pre-pandemic expectations. The semiconductor crisis was among the
most disruptive of several external impacts that combined to drive
down the opportunities expected in 2019, but certainly not the only
one.
Global light-vehicle sales reached 93.8 million units in 2018.
Several factors caused sales to drop in 2019, and then COVID-19 and
associated impacts led to a 14% year-over-year decline in global
auto sales in 2020. The recovery in 2021 was held down by
production constraints rather than by a lack of consumer demand or
willingness to buy, and in 2022, those constraints caused yet
another decline.
The June 2023 S&P Global Mobility forecast sees sales
reaching 83.6 million units globally this year — another
93-million-unit year is not forecast until 2027, thus pushing the
potential for sales above 100 million units past 2030.
As for global light-vehicle production, that number reached 94.1
million units in 2018, also falling in 2019 to about 88 million.
The pandemic and related supply chain woes pulled production down
by 16% year over year in 2020. With supply chain issues approaching
a more normalized situation in 2023, output is forecast to reach
85.6 million units this year. Although we will see another
88-million-unit production year in 2024, output above 94 million
units is not expected to occur until 2028.
Mid-2023 marks an inflection point when the semiconductor supply
is no longer limiting vehicle production. There will continue to be
parts of the supply chain that pose threats but those seem more
episodic than systemic. Geopolitical threats persist in terms of
wafer and packaging capacity in the Asia-Pacific region, but the
industry is also moving forward with adding capacity in Japan,
Europe, and North America.
The effectiveness of and responses to the US-led semiconductor
technology embargo are still to be determined. Rebounds in
non-automotive semiconductor market growth are an unknown factor.
From the automotive industry perspective, lessons learned from the
pandemic shortages — especially the long-term balance of mature
versus advanced process nodes — is critical. The trends of
electrification and autonomous driving will impact vehicle
architectures, which in turn will impact the mix and number of
semiconductors used. The industry may have survived the COVID
semiconductor crisis, but that does not mean it is out of the
woods.
MOBILE PHONE DEMAND COOLS; AUTO CHIPS RED HOT
AUTOMOTIVE COMPONENT FORECASTS
DOMAIN CONTROLLERS AND ZONAL ARCHITECTURE
AUTOMOTIVE TECHNOLOGY MARKET RESEARCH AND ANALYSIS
LIGHT VEHICLE PRODUCTION FORECASTS
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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- Source: http://www.spglobal.com/mobility/en/research-analysis/the-semiconductor-shortage-is-mostly-over-for-the-auto-industry.html
