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 convey readers, drivers and passengers in control on the auto market’s rising traits.

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

Auto Trade 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 exhausting by this scarcity, the most recent wave of which is attributable to a number of components 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 precipitated larger disruptions than these throughout final yr or final quarter.

Disruptions to Imports and Manufacturing

Automakers around the globe are scrambling to handle the chip scarcity situation, which has continued since early 2020 with out a correct resolution to this point. In keeping 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 because of the 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.

Trade specialists usually consider that the most recent spherical of Covid outbreaks in Malaysia are answerable 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 corporations, together with Infineon, Intel, ASE, STMicroelectronics, Huatian Know-how, Tongfu Microelectronics, Suzhou Good-ark (Chinese language corporations), Inari, MPI, Unisem, Globetronics have packaging and testing crops in Malaysia. Different corporations, resembling Renesas and World Wafers, function wafer crops there.

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

At current, China’s home corporations with manufacturing and design capabilities embrace 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 domestically.

Limitations on the supply of uncooked supplies are creating an extra bottleneck within the native provide of automotive chips. For example, KrF photoresist is a crucial materials for the manufacture of 8-inch and 12-inch wafers generally utilized in automotive chips. Trade specialists consider that the standard of photoresist determines the precision and yield of chip manufacturing. The photolithography course of accounts for about 30% of the whole value of your entire chip manufacturing course of, and about 40%-50% of the whole manufacturing time. Furthermore, photoresist has a shelf lifetime of simply six to 9 months, limiting storable stock. Attributable to excessive technical limitations and strict course of necessities, China largely is determined by imported high-end and high-quality krypton fluoride (KrF) photoresist for its home chip manufacturing.

Chip manufacturing includes an enormous and sophisticated {industry} chain, and proprietary core applied sciences belong to an array of worldwide 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 corporations, 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 just lately notified a number of high fabs in mainland China that as a consequence 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. In consequence, home fabs resembling SMIC, Huahong and Silan Built-in Circuit can be in brief provide of KrF photoresist.

In keeping with analysis institutes, China is residence to roughly 14 photoresist-related corporations 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 concentrate on producing UV adverse/constructive photoresists and i-line and g-line photoresists. The native sourcing fee for high-end KrF photoresists is lower than 1%, from corporations together with Beijing Kempur, Fujian Hongguang Semiconductor, Jiangsu Hantuo, and Shanghai Core Carving Micromaterial Know-how, amongst others. Till home producers improve their manufacturing of KrF photoresist, these provide disruptions will persist.

Deeper Points at Play

If we glance past the worldwide pandemic and geopolitical adjustments, we see that the automotive-grade chip scarcity can be as a consequence of chip producers’ unwillingness to prioritize the auto {industry}’s chip wants, a difficulty 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 need to meet larger 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 elements suppliers are in a comparatively deprived place given their smaller proportion of orders and excessive security necessities.

To deal with this situation, China’s Ministry of Trade and Data Know-how arrange a working group for the promotion and utility of automotive semiconductors. They met with native governments, car corporations and chip corporations 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 value monitoring and clue assortment. Supervision and legislation enforcement can be strengthened sooner or later, to strictly prohibit and punish unlawful actions resembling hoarding, value 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 elements, chips require three to 4 years to maneuver from R&D to vendor coordination and proof of reliability. Altering suppliers strains the software program capabilities of automotive corporations, limiting its practicality, and is an ineffective resolution within the face of industry-wide shortages.

Trade 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 cut back prices prior to now was to supply globally and promote in bigger markets, in order that manufacturing could possibly be accomplished in low-cost locations and nil stock could possibly be achieved. Nevertheless, this technique has confirmed problematic. We should think about the influence of worldwide disasters and geopolitics and localize productions nearer to their finish market. It isn’t about manufacturing with the bottom value, however diversifying manufacturing amongst extra international locations, so long as costs can take up the associated fee will increase. We must also keep an acceptable degree of stock as an alternative of pursuing zero stock.”

When Will it Finish?

At current, the chip disaster immediately impacts OEMs’ every 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 via the primary quarter or probably even the second quarter of 2022.

The China Automotive Know-how & Analysis Heart’s information firm created a projection mannequin for the scarcity in line with its related information {and professional} analyses. Based mostly upon this mannequin, the corporate talked about in its April 2021 {industry} service report that “the scarcity of automotive chips is not going to be successfully alleviated by the top of 2021 and the manufacturing of passenger autos can be pressured to cut back by about 10% all year long.” The corporate has maintained this view in subsequent month-to-month experiences.

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 unravel this complicated drawback 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, automotive 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 automotive consumers via a nationwide vendor community. The Firm’s providers primarily include automotive financing facilitation, automotive 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 person 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
E-mail: [email protected]
Twitter: https://twitter.com/Cango_Group

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