The latest progress of negotiations between IDM/Tier1 and OEM! The price of these car chips may rise

Source: Network

    Many vehicle IDM factories initially wanted to renegotiate the contract, strive for more vehicle OEM capacity, maintain or lower the price, but most estimates were difficult to reach. On the whole, the OEM prices of most automotive chips were not cut down in 2023, nor maintained at the level of 2022, but accepted the rise according to the wishes of the OEM. Some IDMs have told OEM partners that they can accept any market price of OEM services, or even further price increases, as long as the partners can promise to provide additional capacity support.

    It is reported that these foundries include TSMC, UPS, World Advanced, Lattice, etc. According to the market judgment, IDM manufacturers may face a dilemma in the future, and it is difficult to completely transfer costs to the downstream.

    According to the latest data of AFS, the auto industry data forecast company, as of November 27, the global auto market had lost about 4117600 cars this year due to the shortage of chips. AFS estimates that in 2022, the shortage of chips will lead to the reduction of global automobile production by about 4.4853 million vehicles.

    Crucially, according to the analysis of Alix Partners, a management consulting company, the shortage and high price of automobile chips may last for two years due to the lack of power for wafer foundries to expand into the automobile field.

    Although the sales of the terminal market are sluggish and the demand for consumer application chips is declining, the wafer foundry should have more ability to support the production of automobile chips, but the shift to manufacturing automobile chips also means that the cost will increase significantly.

    Data shows that, first of all, from the perspective of the wafer factory, the automobile industry was just a small buyer of semiconductor chips in the past, accounting for 6% to 10% of the global production capacity. In addition, the profit margin created by automobile chips for the wafer factory was 11 percentage points lower than that of consumer chips.

    Secondly, in terms of capacity conversion, if the production capacity of the wafer foundry has been verified by the automobile customer, it will take at least six months to convert its process capability to manufacturing automobile chips. For the process capability that has not been certified for automobile chip production, it will take 2-3 years to complete the verification. After the completion of testing and verification, the OEMs must still try to achieve the good yield required to ensure the profitable mass production of automotive chips, thus bringing them a lot of additional costs.

    In this case, although IDM or first-line auto parts suppliers have made big order commitments, it is a challenge to obtain preferential quotations and even more capacity from the OEM.

    For the automotive manufacturers, in order to cope with the continuous capacity contraction of upstream automotive chips, they have started to adjust their 2023 automotive design, so that they can purchase chips with the same function from more than two suppliers, or chips from the same supplier can accept different pins. In this way, they can more flexibly cope with the shortage of automotive chips, mainly MCU, MPU and IGBT chips and modules.

    At the same time, due to the shortage of some chips and parts, it is difficult to assemble them as a whole in a short period of time, which also leads to the problem of increased inventory of other parts.

    A source said that two years ago, some distributors tried to integrate the unbalanced supply of components faced by supply chain participants to achieve the best proportion of overall supply, but failed. IDM, first tier suppliers and automobile manufacturers generally regard which components are in short supply as confidential.

     For the industrial chain, in addition to the limited capacity of the foundry, the insufficient transparency of the uneven supply of chips and components will also affect the overall supply of automotive semiconductors.