Global car-chip shortage not likely to ease till Q3 despite Taiwan semiconductors' efforts

03, Feb. 2021

A staff handing wafers at an 8-inch foundry of Taiwan Semiconductor Manufacturing Corp. (Courtesy of TSMC)
A staff handing wafers at an 8-inch foundry of Taiwan Semiconductor Manufacturing Corp. (Courtesy of TSMC)

By Gloria Cho

TAIPEI, NNA - Major Taiwanese semiconductor makers said they are making efforts to help ease global shortage in automotive chips, an unforeseen crisis that has crippled car production around the world.

Already, chip makers have reached full capacity for earlier commitments to cater to the surge in 5G smartphones, laptops and other devices required for remote-work arrangements as a result of lockdowns to control the COVID-19 pandemic.

Even as they are trying to make adjustments to accommodate the demands of automotive makers, they could only deliver meaningful supplies from the third quarter.

Taiwan Semiconductor Manufacturing Co. (TSMC), United Microelectronics Corp. (UMC), Powerchip Semiconductor Manufacturing Corp. and Vanguard International Semiconductor Corp. have said they would boost chip production as much as they could to support car industries in the United States, Japan, and Europe after they voiced their pleas for help.

Car makers, which had remained idle during lockdowns when sales were dismal, did not expect car buyers to come back fast and furious when the more severe restrictions were lifted subsequently.

The shortage has hit companies like Volkswagen AG, Subaru Corp., Toyota Motor Corp., Nissan Motor Co., Ford Motor Co., and Fiat Chrysler.

TSMC, the world's largest contract chipmaker, said in a statement last week that it is speeding up the production of critical automotive products as a "top priority".

"TSMC is currently expediting these critical automotive products through our wafer fabs. While our capacity is fully utilized with demand from every sector, TSMC is reallocating our wafer capacity to support the worldwide automotive industry," said TSMC which operates plants in the U.S., China and Taiwan.

In fact, sales of TSMC's auto chips jumped 27 percent from the third to fourth quarter last year as it responded to demand.

Expecting the car chip shortage to persist for the next six months, Liu Pei-chen, a semiconductor researcher from Taiwan Institute of Economic Research (TIER), told NNA, “Despite their efforts, the shortage will continue into the end of Q2 or the beginning of Q3 as chipmakers have met their capacity limits now.”

After a meeting with Taiwan Economy Minister Wang Mei-hua last Wednesday, the country's chipmakers said they would negotiate with clients in non-auto sectors to postpone order delivery or reduce order size.

UMC co-president Jason Wang said his firm “will try our best to help with the chip shortage and we have been doing that since the beginning of this year.”

Giving her assurance to car makers, minister Wang said, “They will try to optimize their production lines. For example, if their capacity is at 100 percent now, they will try to raise it to 102 percent or 103 percent, with the extra capacity for making auto chips.”

Taiwan's economics ministry said Wang is expected to hold a virtual meeting with the U.S this Friday “to work with industry players to promote closer cooperation in the Taiwan-U.S. industrial chain.”

The automotive market is set to make a recovery, with sales increasing by 7 million to 84 million units in 2021, according to a TrendForce report.

Researcher Liu expects auto-chip shortage to drive up prices by at least 10 percent.

However, it may not necessarily increase the coffers for chipmakers much as the strength of the New Taiwan (NT) dollar against the greenback has now hit a 23-year high.

Wang expects the appreciation of the NT dollar to offset more than half of the growth projected for Q1.

Often described as the largest beneficiary of U.S.-China trade war, Taiwan is taking steady steps to solidify its leadership in making even smaller, more sophisticated chips.

Riding on the bullish prospects, TSMC has allocated an all-time high capital expenditure of $28 billion, while UMC plans to spend $15 billion this year.