(The original article in Japanese was posted on April 2, 2021)

 

On March 30, Renesas Electronics Corporation mentioned its Naka factory whose operation had been shut down due to the fire, saying, “We will restart the production in the factory within a month.” Then they corrected the number of the damaged manufacturing machines from 11 to 23 and said, “It will take 3 to 4 months to make it back to the production level at the time before the fire.” However, the delivery time of new machines to be replaced with the damaged ones is still “under negotiation,” and it is still far from reassurance for the automotive industry that has been forced to significantly adjust the production amid the global shortage of semiconductors.

In the first place, why the global shortage of semiconductors for automotive manufacturers occurred? The U.S-China conflict and the COVID-19 were of course parts of the causes. The U.S. applied sanctions against Chinese contract semiconductor manufacturers, and then too many orders of semiconductors started to be placed with Taiwanese manufacturers. On the other hand, Taiwanese manufacturers anticipated the stagnation of automotive demand under the influence of global spread of the COVID-19 infection and formed a manufacturing plan taking into consideration the changes to “remote”-based society and the expansion of investment in 5G technologies. However, the demand of semiconductors for automobiles had recovered rapidly being led by the Chinese market, which resulted in extreme stringent supply and demand, and worse still, was followed by a cold wave and a power failure in North America.

Under these circumstances, the governments of some countries with strong automotive industry such as the U.S., Japan, and Germany, requested the Ministry of Economic Affairs, Government of Taiwan, to increase the production of automotive semiconductors, and the Taiwanese government has also instructed the contract semiconductor manufacturers to comply with the request. The manufacturers accepted this request and said, “We will try to maintain the full operation of manufacturing capacity and prioritize the manufacturing of semiconductors for automobiles.” Having said that, even at the leading semiconductor manufacturer in Taiwan, Taiwan Semiconductor Manufacturing Company, Ltd. (TSMC), automotive semiconductors account for only a few percent of all products they manufacture. The company’s major customers are manufacturers of smartphones, game consoles/gaming devices, personal computers, and high-performance servers for data centers. Automotive manufacturers are not “important customers” for the Taiwanese semiconductor manufacturers due to the strict terms and conditions on trading and low profitability. What they really don’t want to do may be to deprioritize their major customers from non-automotive sectors, who placed orders earlier than the automotive manufacturers.

Automobile industry has been in the midst of a large structural change with the advancement of technologies such as electric vehicles (EV) and advanced driver assistance system (ADAS). The “change” does not only means the subcontractors with technology of internal-combustion engines will be taken over by those with electronics technologies, but also means the automotive manufacturers’ throne of the entire supply chain will become precarious sooner or later. Decrease of production due to the shortage of semiconductors could be the “fray” of the industrial pyramid where finished automobiles have been on the top. Toyota Motor Corporation declared in the Annual Report 2018 that the company would be transformed from a car-manufacturing company into a mobility company.” The company also clearly said that their competitors would be Google, Amazon, Facebook, and Apple (GAFA) in the current age of CASE¹ and MaaS². This is what the “Once-in-a-Century Period of Profound Transformation” means and what is happening now in the automobile industry is not just something transient.

 

1: CASE: Connected, Autonomous/Automated, Shared, and Electric

2: MaaS: Mobility as a Service

 

 

This Week’s Focus, April 2, 2021

Takashi Mizukoshi, the President