Just a few days ago, Infineon smashed 5 billion yuan to expand production capacity of 12-inch plan is still making people lament the automotive chip market "dominance" still, after all, the global semiconductor market downturn is an indisputable fact, but the automotive chip maker Infineon still choose to expand production against the trend, and even made the largest single investment in history, which seems to be the automotive chip market The biggest proof of the strong momentum of the upturn.

However, a week later, the internationally renowned investment institution DAMO Securities warned that there is an oversupply of automotive chips, and pointed out that Renesas and ON Semiconductor have issued a single order to cut the 4th quarter chip test orders. At a time when consumer electronics is weak, the automotive business once became the "lifeline" of many chip makers, from the beginning of 2020 to the end of 2022, the former infinite scenery is going to usher in the curtain moment?

Automotive chips in the "surplus" storm?

In fact, previously, TSMC and the world advanced on the quarterly law said the car and server chips will be adjusted inventory warning. And the big Morgan securities that automotive chips will turn from shortage to oversupply, mainly for two reasons: First, TSMC 3 quarter automotive semiconductor wafer output annual growth of 82%, 140% higher than before the epidemic; Second, China's electric car sales turn weak (accounting for fifty to sixty percent of the global electric car), so that automotive semiconductors have been fully supplied, which led to automotive chip makers have cut orders.

The big Morgan semiconductor industry analyst Zhan Jiahong pointed out, compared with the global automotive semiconductor revenue trends and automotive production changes, can be found in recent years, automotive semiconductor revenue compound annual growth rate (CAGR) up to 20%, automotive production is only 10%. In this trend, the oversupply of automotive semiconductors should have occurred at the end of 2020 and early 2021, but at that time, affected by the spread of the global new crown epidemic, the transportation was not smooth and even cut off, resulting in an extreme shortage of automotive chips and continued shortage of goods. However, recently, as the impact of transportation gradually eased, the increase in the production capacity of chip manufacturers, coupled with the weakening of automotive terminal demand, resulting in full production of automotive chips, the shortage of chips that has plagued the automotive industry for a long time has officially ended.

From the perspective of the cycle, the shortage of automotive chips has been more than 3 years. 3 years ago, because car manufacturers did not predict the rapid growth of new energy vehicles, smart cars, and therefore did not order chip manufacturers in advance, coupled with the impact of the epidemic, automotive chip shortage has become more serious. 3 years later, as the global epidemic tends to moderate, the semiconductor market also due to high inflation led to demand contraction, coupled with the past few years of investment in chip manufacturers new Production capacity gradually released, the shortage of automotive chips to ease seems to be a natural thing, but many car manufacturers do not seem to feel the joy of automotive chips "within reach".

Just a few days ago, Ford CEO Jim Farley is still exclaiming: "too much pain, we need chip engineers." According to the head of Ford, in the past two years, chip supply constraints have cost Ford 1.3 million vehicles, while the same problem led to the loss of Ford this year, 4 million employee workdays.

Apparently, Ford is not the only one whose car production has been affected by the lack of chips, as Changan also lost 606,000 vehicles in the first nine months of this year. Data from Auto Forecast Solutions, an automotive industry data forecasting company, shows that by the end of October, the global automotive market had lost a cumulative total of about 3.905 million vehicles this year due to chip shortages. According to the forecast, by the end of this year, the cumulative production cut in the global automotive market will climb to 4,278,500 vehicles, an increase of about 16,200 vehicles from the previous estimate.

Judging from the number of cars whose production has been cut due to the lack of cores, the shortage of automotive chips is far from the end of the story. On the other hand, according to the Economic Daily News, the unnamed IC design industry also said frankly that, compared with the previous automotive chip shortage, the supply and demand now indeed tends to be more balanced, the supply chain has improved the situation of long and short material, but still less than the degree of oversupply

Obviously the lack of automotive core has been up to 3 years, why the shortage problem still exists? Since the upstream chip cut single wind has been rumored, then the automotive chip market can still hold up for how long?

The reason why automotive chips are still in shortage of cores, there are two main reasons: First, the automotive supply chain is long and complex. From the fab output chip to the automotive supply chain processing, and then to the supply chain like Bosch such a large factory can output, at least three to five months, and thereafter to experience the group car factory to obtain the car chip and then assembled into a car, during which time, the time to reach the destination through logistics and sea transport is quite long. According to the Economic Daily News, many car manufacturers believe that the current supply chain situation, I'm afraid that by the middle of next year, because of the chip shortage caused by the lack of cars, but also can not improve the problem.

Second, the shortage of mature chips needed for cars is serious. Compared to advanced chips, mature chips are a major obstacle to the impact of automotive production, such as Ford's MOSFET chips for windshield wipers, the cost per piece is only $ 0.40, but it affects the production of Ford 40,000 vehicles.

In order to continue Moore's Law, consolidate their position in the field of foundry, TSMC, Samsung and other major semiconductor manufacturers to attack the advanced process, but these initiatives for the desire to mature chips for automakers, more like a butcher's knife to cut off the lifeblood. Although the current huge demand driven by chip manufacturers have also realized the market prospects of mature chips and began to expand investment, but "distant water can not put out the fire", the future of mature chip capacity and how to fill the immediate chip gap?

S & P Global Mobility Autonomy and E / E & Semiconductor director Jeremie Bouchaud believes that 2022-2023, chip makers on the mature process node capacity surge expansion investment, is unable to show the desired capacity results at any time before the next 18-32 months, which is the average delivery time semiconductor industry new capacity debugging.

Although Mercedes-Benz, Hetai, Yu Ri car and other car manufacturers that the shortage of automotive chips will not be solved until next year, but from this point in time proposed by Jeremie Bouchaud, automotive chips next year to get relief is already very optimistic expectations, Bosch China Executive Vice President Xu Daquan said that the lack of core problem has not been solved, and the forecast for next year is not optimistic, many chip suppliers respond Next year is not enough to meet the procurement needs, the current supply of automotive chips there is still a gap, some chips gap is larger. Ford Farley even believe that the automotive industry chip crisis is unlikely to ease until 2025.

Storage makers, relying on cars to blow the counter-attack horn

At present, the automotive chip to hold up for another two or three years should not be a problem, but as a member of the semiconductor industry, the cycle fluctuations are inevitable, even if the supply exceeds demand again today, there will be a day of oversupply, DAMON Securities has given the industry a good shot in advance, ON Semiconductor, Renesas cut single also hinted at the seeds, but other chip makers for the automotive business preference is still "emboldened", even if the storage manufacturers now facing the impact of the semiconductor downturn market is no exception.

For storage manufacturers, 2022, especially in the second half of 2022, the situation is particularly difficult, the storage market shrinkage is serious, affected by its impact, the world's top three storage manufacturers Samsung Electronics, SK Hynix and Micron Technology in the third quarter of this year, the amount of revenue have fallen sharply, Samsung's third quarter sales fell 28.1% ringgit, and therefore by Intel took away the leading position in the semiconductor market, SK Hynix Sales fell by more than 26%, and Micron sales fell by more than 27%.

Top 10 global chip sales in the third quarter (excluding foundries)

Source: Omdia

In contrast to data centers, personal computers and mobile devices, where demand has decreased significantly, demand for high-performance chips for electric vehicles is growing rapidly, which may also be one of the reasons why storage vendors are turning their attention to automotive semiconductors. On the other hand, as smart cars become more popular, the car's demand for memory is growing. People's most definition of smart cars is "smart phones with four wheels", and in the development of smart phones over the years, the larger the phone memory is bought is the personal feelings of many people, social software, games, etc., all occupy a large memory, from this point of view, the smart car configuration memory capacity will only get larger, which is an irreversible trend. This is an irreversible trend. According to Micron's estimation, the DRAM and NAND needed for a fully self-driving car is 30 times or 100 times more than that of a human-driven vehicle.

Samsung as the world's number one storage manufacturer, the recent efforts in the field of automotive semiconductors is evident to all. Samsung Electronics predicts that automotive semiconductors will grow into the top three chips along with chips for servers and mobile devices by 2030, so it has set a goal to take the No. 1 position in the automotive memory market by 2025 and plans to respond to the demand for high-performance automotive semiconductors by providing next-generation memory solutions such as LPDDR5X and GDDR7 chips.

Samsung launched the industry's first automotive UFS solution back in 2017, and late last year Samsung began mass production of automotive memory with a product lineup that includes 256GB PCIe Gen3 NVMe ball grid array package (BGA) SSDs, 2GB GDDR6 DRAM and 2GB DDR4 DRAM for infotainment systems, and 2GB GDDR6 DRAM and 128GB universal flash memory (UFS) for self-driving systems. As for SK Hynix, another Korean storage major, which set up an automotive team in 2016 to specialize in automotive DRAM, businesskorea recently reported that, like Samsung, SK Hynix has also turned its attention to automotive semiconductors.

However, to discuss the current automotive DRAM which is strong, that naturally belongs to Micron. Micron Technology has been working on automotive chips for more than 30 years, and with its geographical advantage, longer cooperation time with European and American Tier-one car manufacturers, and a full range of products (the most traditional DDR to DDR4, LPD2 to LPD5 and GDDR6, and NAND, NOR Flash and MCP are all available), it has a market share of nearly 50% in the automotive DRAM field. As the top automotive storage supplier, we have a strong market share of nearly 50%.

As a top automotive storage supplier, Micron is very optimistic about the future automotive market, estimating that by 2025, the annual growth rate of DRAM bits in the automotive market will reach 40% and NAND 49%. At the beginning of last year, Micron launched LPDDR5 memory specifically designed for automotive use, with a 50% increase in data access speed and over 20% improvement in energy efficiency. In November, Micron officially launched the world's most advanced 1β technology node DRAM, and while it is currently only sending samples to some smartphone manufacturers and chip platform partners for validation, Micron also emphasized that it will mass produce 1β nodes in other applications such as industrial and automotive, embedded, and data center in the coming year.

In addition, Taiwan's Nan Ya Tech and Huabang Electric are diversifying to meet the automotive market. Nanya has a complete product portfolio from DDR to DDR4, LPSDR to LPDDR4X for use, and the yield rate is quite stable for now. Huabang, on the other hand, has been cultivating in the automotive field for more than 10 years, and its NOR Flash and niche DRAM have been able to provide stable supply to the global first-tier car manufacturers, and its D20 process products have made a big push into the automotive field, and a series of certifications are expected next year.

The general manager of Huabang Electronics, Pei-Ming Chen, recently emphasized that Huabang Electronics will actively enter the automotive market, which is more favored by the market. According to him, at present, in the Nor Flash, Huabang Electric contains about 20% of the automotive market in the field of industrial control, and will further develop the automotive DRAM field in the future, the Taichung plant has already obtained the relevant customer certification, and the Kaohsiung plant will actively prepare for certification, these steps will be very important to enter the automotive electronics market.

Macronix has been expanding its automotive chips since 2009 and has shipped more than 440 million coded flash memory chips worldwide. Macronix has become the leading automotive NOR Flash supplier. Although Macronix's 2022 capital expenditures have been revised downward from the original $16 billion to $10.6 billion due to the general environment, Macronix will focus its future capital expenditures on NOR Flash applications and strive to maintain stable prices in the fourth quarter and 2023.

Although many storage makers are turning to automotive semiconductors, it is not easy to do a good job with automotive chips. For example, since the life span of a car can easily jump from 10 years, the maintenance and durability requirements of automotive storage product lines are much higher than those of general commercial products; or to adapt to the extreme climate of different countries, automotive internal temperature tolerance needs to have a higher threshold to avoid sudden failures during driving. All these will bring the challenge of high production difficulty and high production cost for automotive DRAM.

Wafer foundry, pure car manufacturers will also become the target of competition?

The automotive track is arguably the first new track that foundries are actively laying out at a time when consumer electronics are shrinking, and the hottest recent event is TSMC and Samsung vying for Tesla orders.

The cause of the matter is that TSMC's 5 nm fab built in Arizona, U.S. will be completed soon, and foreign media reports said that one of the most important customers of the fab is the leading electric car Tesla, and may be the largest order TSMC U.S. plant, TSMC will OEM for Tesla's new generation of fully automated driving (FSD) chip, to 4/5nm process production, Tesla is expected to become the top 7 customers in 2023 TSMC's top 7 customers. If the news is true, then Tesla will become the first pure tram factory to appear among TSMC's main customers.

In the past, TSMC's top 7 customers were mostly brand companies, IC design companies and IDM factories, but pure car manufacturers are the first case. Although neither Tesla nor TSMC responded to the news, it must be admitted that TSMC's recent assault on the automotive sector has been very aggressive. In addition to the DAM Securities pointed out, TSMC 3 quarter automotive semiconductor wafer output annual growth of 82%, TSMC three quarter automotive electronics revenue is also very impressive, earnings data show that TSMC 3 quarter of this year, automotive electronics revenue accounted for about 5% of the related revenue amount quarterly growth of about 15%, quarterly growth in the top three applications. Legal estimates, TSMC's revenue from automotive electronics in the third quarter of this year exceeded $1 billion.

In the MCU field, TSMC production of automotive MCU has accounted for about 70% of the market share, Infineon, ST, NXP, TI, Renesas Electronics and other major suppliers of MCU using TSMC foundry; in terms of capacity planning, TSMC Nanjing and Japan production line, are likely to be used for automotive wafer production.

In this news of Tesla's order TSMC, the former can have a more advanced manufacturing process, the latter can have a not insignificant order, and Samsung may have become the only injured person in this news. As the world's second largest foundry after TSMC, Samsung is the main foundry partner of Tesla's previous generation of fully automated assisted driving chip Hardware 3.0, mainly using the 14nm process.

At the end of last year, a source revealed that Tesla and Samsung Electronics foundry department from the beginning of 2021 for chip design and sample production, and finally Tesla decided to outsource the HW 4.0 autopilot chip to Samsung, and Samsung will be produced in South Korea's Hwaseong factory with a 7nm process. But a year later, it was rumored that Tesla will switch to TSMC main supply, Samsung is to provide the previous generation of the old chip production and memory part of the support of the main news, which should not be small damage to Samsung.

After all, from the industry's estimates, Tesla's order volume is very substantial. The industry to Tesla production plan estimates, Tesla next year's production scale is expected to jump from 3 million vehicles, to fully automatic assisted driving chip using 2 chip design (a main and a backup assistance), if the long contract focused on TSMC and with advanced packaging and other design, TSMC order volume is estimated to reach nearly 15,000 pieces, and continue to grow rapidly. From this point of view, with the continued expansion of the future smart car market scale, those self-researched chip-making core forces may also be expected to become a foundry to compete for the target.

In October, South Korean analysts pointed out that Samsung has plans to invest in Europe to establish new fabs, whose target customers are the European automotive electronics semiconductor needs. Samsung also shared its willingness to strengthen its automotive semiconductor business at a technology forum held recently.

At the 2022 Foundry Forum, Samsung's Foundry Division also disclosed plans to increase the number of mature and specialized processes in foundries by more than 10 by 2024, an increase that would be 2.3 times the capacity at that time in 2018. This is certainly good news for the serious shortage of mature chips for automakers.

Of course, in addition to TSMC and Samsung, other foundries are also actively laying out. UMC confirmed that the automotive chip will be one of the focus areas and spindle of its layout of special processes; world advanced automotive electronics continue to introduce a number of process technologies and into mass production, and into the supply chain of international automotive manufacturers; Gecko will continue to expand automotive chip production capacity; Hua Hong to enter the automotive chip market; JH car specification certification to accelerate ...

Write at the end

Although computers and communications are still the main driving force of the IC market, automotive applications account for a relatively low proportion, but look to the future, the prospects are undoubtedly huge, IDC report shows that China's new energy vehicle market size will reach 15.98 million units in 2026, a compound annual growth rate of 35.1%. Chip makers are turning to automotive semiconductors, a large part of the reason is to over-deploy to deal with the boom future. As for the future may face the problem of oversupply, the entire semiconductor industry has the characteristics of the cycle, as long as the strength is excellent, why fear the unknown future?