SHANGHAI, Oct. 22, 2021 /PRNewswire/ — Cango Inc. (NYSE: CANG) (“Cango” or the “Firm”) is issuing a bi-monthly {industry} perception publication known as “CANGO Auto View” to carry readers, drivers and passengers up to the mark on the auto market’s rising developments.

Under is an article from the Firm’s fifth version for September 2021.

Auto Business Faces a Chip Squeeze

The Covid-19 pandemic has wreaked havoc within the world provide chain and created shortages throughout all industries, together with a semiconductor chip scarcity. The auto manufacturing {industry} was hit significantly arduous by this scarcity, the newest wave of which is attributable to a number of elements together with Covid-19. Along with capping vehicle manufacturing and gross sales, the “chip squeeze” is deeply affecting the entire auto {industry} chain in China. Chip shortages since July 2021 have brought on higher disruptions than these throughout final yr or final quarter.

Disruptions to Imports and Manufacturing

Automakers all over the world are scrambling to handle the chip scarcity problem, which has persevered since early 2020 and not using a correct answer up to now. In line with a non-exhaustive survey, greater than 30 auto manufacturing factories stopped manufacturing this yr. As well as, Kia, a conventional auto OEM model, introduced that it’ll cease manufacturing in its US manufacturing unit. Kia was pressured to cease manufacturing in early Might 2021 as a result of chip scarcity. Given the severity of the scarcity, it’s no shock that even robust conventional auto manufacturers are having problem dealing with the challenges.

Business consultants typically consider that the newest spherical of Covid outbreaks in Malaysia are liable for the newest wave of chip shortages. Malaysia is the most important chip manufacturing base in Southeast Asia and performs an necessary position within the world chip {industry}. Greater than 50 world chip firms, together with Infineon, Intel, ASE, STMicroelectronics, Huatian Know-how, Tongfu Microelectronics, Suzhou Good-ark (Chinese language firms), Inari, MPI, Unisem, Globetronics have packaging and testing vegetation in Malaysia. Different firms, comparable to Renesas and International Wafers, function wafer vegetation there.

Publicly-available data exhibits that Malaysia accounts for as a lot as 13% of world chip packaging and testing capability, and the Covid outbreaks there additional strained the already-reduced auto chip provide. Chinese language automotive chip producers have acquired notices requesting manufacturing line staffing reductions to help pandemic prevention efforts. Native automotive multilayer ceramic capacitor (MLCC) manufacturing traces, together with these of AVX and Murata, have additionally encountered pandemic-related manufacturing restrictions.

At current, China’s home firms with manufacturing and design capabilities embody BYD Microelectronics, Unigroup Guoxin Microelectronics, Black Sesame Applied sciences, SemiDrive Know-how and Horizon Robotics, with relative specialties in manufacturing, design, and algorithms. Because of the small proportion of native manufacturing capability, lower than 10% of the auto-grade chips in China are sourced regionally.

Limitations on the provision of uncooked supplies are creating a further bottleneck within the native provide of automotive chips. As an illustration, KrF photoresist is a vital materials for the manufacture of 8-inch and 12-inch wafers generally utilized in automotive chips. Business consultants consider that the standard of photoresist determines the precision and yield of chip manufacturing. The photolithography course of accounts for about 30% of the entire price of your entire chip manufacturing course of, and about 40%-50% of the entire manufacturing time. Furthermore, photoresist has a shelf lifetime of simply six to 9 months, limiting storable stock. On account of excessive technical limitations and strict course of necessities, China largely is dependent upon imported high-end and high-quality krypton fluoride (KrF) photoresist for its home chip manufacturing.

Chip manufacturing includes an enormous and complicated {industry} chain, and proprietary core applied sciences belong to an array of world gamers. The U.S. dominates software program design, the Netherlands has the lithography machine expertise, and Japan has the photoresist expertise. Japan has a digital monopoly on the photoresist market as a result of Japanese firms, together with JSR, Tokyo Ohka Kogyo, Shin-Etsu Chemical and Fuji Electronics, account for greater than 83% of the worldwide market share.

Shin-Etsu Chemical lately notified a number of high fabs in mainland China that as a result of decreased KrF photoresist manufacturing capability and the demand surge brought on by the worldwide growth of fabs, their provide of KrF photoresist is restricted. It additionally suspended shipments of KrF photoresist to some small and medium fabs. Consequently, home fabs comparable to SMIC, Huahong and Silan Built-in Circuit will likely be in brief provide of KrF photoresist.

In line with analysis institutes, China is house to roughly 14 photoresist-related firms and photoresist producers. Fewer than seven have achieved mass provide, together with Beijing Kempur, Suzhou Ruihong, Weifang Suntific, Jiangsu Aisen Semiconductor, and Jiangsu Hantuo. They deal with producing UV adverse/optimistic photoresists and i-line and g-line photoresists. The native sourcing price for high-end KrF photoresists is lower than 1%, from firms together with Beijing Kempur, Fujian Hongguang Semiconductor, Jiangsu Hantuo, and Shanghai Core Carving Micromaterial Know-how, amongst others. Till home producers enhance their manufacturing of KrF photoresist, these provide disruptions will persist.

Deeper Points at Play

If we glance past the worldwide pandemic and geopolitical modifications, we see that the automotive-grade chip scarcity can also be as a result of chip producers’ unwillingness to prioritize the auto {industry}’s chip wants, a problem that must be addressed with a special technique. Automotive-grade chips account for simply 10% of the worldwide semiconductor chip market, which totals an estimated US$300-400 billion. Automotive chips don’t require top-notch course of expertise, however they have to meet greater security and stability requirements in comparison with industrial-grade chips and consumer-grade chips. Due to this fact, when chip producers’ provides and manufacturing capabilities are restricted and corporations from numerous industries should compete to have their chip orders prioritized, automakers and auto components suppliers are in a comparatively deprived place given their smaller proportion of orders and excessive security necessities.

To deal with this problem, China’s Ministry of Business and Info Know-how arrange a working group for the promotion and utility of automotive semiconductors. They met with native governments, automobile firms and chip firms to formulate focused measures to enhance the automotive chip provide. The State Administration for Market Regulation additionally introduced that it’ll examine auto chip distributors suspected of bidding up costs based mostly on worth monitoring and clue assortment. Supervision and regulation enforcement will likely be strengthened sooner or later, to strictly prohibit and punish unlawful actions comparable to hoarding, worth rigging, and collusion.

These measures will enhance the scenario, however the chip manufacturing course of from R&D to mass manufacturing is so prolonged that the advantages will solely take impact within the medium to long run.

Coping Methods for OEMs

Automotive-grade chips’ lengthy provide cycle creates distinctive challenges for OEMs. In contrast to different auto components, chips require three to 4 years to maneuver from R&D to supplier coordination and proof of reliability. Altering suppliers strains the software program capabilities of automobile firms, limiting its practicality, and is an ineffective answer within the face of industry-wide shortages.

Business leaders are on the lookout for long-term, efficient options. Dong Yang, former standing vice-chairman and secretary-general of CAAM and vice chairman of China EV100, mentioned, “The best way to scale back prices up to now was to provide globally and promote in bigger markets, in order that manufacturing could possibly be accomplished in low-cost locations and 0 stock could possibly be achieved. Nevertheless, this methodology has confirmed problematic. We should take into account the affect of world disasters and geopolitics and localize productions nearer to their finish market. It’s not about manufacturing with the bottom price, however diversifying manufacturing amongst extra nations, so long as costs can take in the price will increase. We must also keep an applicable stage of stock as a substitute of pursuing zero stock.”

When Will it Finish?

At current, the chip disaster immediately impacts OEMs’ day by day operations. IHS Markit, a market analysis firm, launched its newest report on August 19, 2021. It forecasts that the chip disaster will trigger a manufacturing discount of 6.3 to 7.1 million autos (excluding Toyota) in 2021, and that the semiconductor scarcity will proceed by way of the primary quarter or presumably even the second quarter of 2022.

The China Automotive Know-how & Analysis Heart’s information firm created a projection mannequin for the scarcity in accordance with its related data {and professional} analyses. Primarily based upon this mannequin, the corporate talked about in its April 2021 {industry} service report that “the scarcity of automotive chips won’t be successfully alleviated by the top of 2021 and the manufacturing of passenger autos will likely be pressured to scale back by about 10% all year long.” The corporate has maintained this view in subsequent month-to-month reviews.

Whereas there isn’t a clear finish in sight to the worldwide chip scarcity, your entire auto {industry} is working together with the federal government to develop efficient methods to resolve this complicated downside and guarantee future stability.

About Cango Inc.

Cango Inc. (NYSE: CANG) is a number one automotive transaction service platform in China connecting sellers, monetary establishments, automobile consumers, and different {industry} contributors. Based in 2010 by a bunch of pioneers in China’s automotive finance {industry}, the Firm is headquartered in Shanghai and engages automobile consumers by way of a nationwide supplier community. The Firm’s providers primarily encompass automotive financing facilitation, automobile buying and selling transactions, and after-market providers facilitation. By using its aggressive benefits in expertise, information insights, and cloud-based infrastructure, Cango is ready to join its platform contributors whereas bringing them a premium consumer expertise. Cango’s platform mannequin places it in a singular place so as to add worth for its platform contributors and enterprise companions because the automotive and mobility markets in China proceed to develop and evolve. For extra data, please go to: www.cangoonline.com.

Media Contact:

Juliet Ye
Cango Inc.
Tel: +86 21 3183 5088 ext.5581
Electronic mail: [email protected]
Twitter: https://twitter.com/Cango_Group

View authentic content material:

SOURCE Cango Inc.