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The Chip Industry Encounters another Unexpected Event

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that a magnitude 7.4 earthquake struck off the coast of Fukushima, Japan. The earthquake also shut down some factories, including chip maker Renesas Electronics. This tragedy in Japan once again casts a shadow over the auto industry, which is suffering from chip supply bottlenecks and rising raw material prices. A total of three Renesas factories were affected. One of them is an important chip production base for Renesas, and automotive chips account for about two-thirds of the products it produces. The earthquake also affected Japanese car companies such as Toyota and Nissan. Renesas is the world’s third largest automotive chip maker and the world’s largest manufacturer of microcontrollers (MCUs), accounting for about 19 percent of the global market. In addition to Toyota, Nissan, Ford, Great Wall Motors and other automakers are also customers of Renesas Electronics. Many automobile companies are planning to raise prices. Since 2020, the global auto industry has been plagued by chip shortages. According to Auto Forecast Solutions (AFS) data, due to the shortage of automotive chip supplies, the global automobile production volume was reduced by 11.31 million vehicles in 2021, a drop of 14.6 percent, of which the Chinese vendors reduced production by 2.148 million vehicles in 2021. According to the latest forecast from AFS, global automakers may cut production by more than 1 million vehicles in 2022 due to chip shortages. In this context, chip prices have also risen. The shipment cycle of chips is also much longer than before the pandemic. China’s auto production and sales account for about 33 percent of the global market, but auto semiconductors and other components mainly rely on overseas suppliers.

Source: Sina, March 18, 2022