They help control everything from deploying airbags and automating emergency braking to entertainment systems and navigation. The one risk to that view, he says: a sharper economic slowdown that could depress demand earlier.Ĭomputer chips, or semiconductors, are used in the thousands in every conventional and electric vehicle. Pang, for his part, sees China's shortage continuing through 2023 and deems it dangerous to hold inventory after that. A fledgling domestic chipmaking industry is unlikely to be in a position to cope with demand within the next two to three years, it says. Supply strains have been compounded by a zero-COVID lockdown in auto hub Shanghai that ended last month.Īs a result, the shortage is more acute than elsewhere and threatens to curb the nation's EV momentum, according to CATARC, the China Automotive Technology and Research Center. ![]() To counter the supply squeeze, global automakers like General Motors Co, Ford Motor Co and Nissan Motor Co have moved to secure better access through a playbook that has included negotiating directly with chipmakers, paying more per part and accepting more inventory.įor China though, the outlook is bleaker, according to interviews with more than 20 people involved in the trade from automakers, suppliers and brokers to experts at China's government-affiliated auto research institute CATARC.ĭespite being the world's largest producer of cars, and leader in electric vehicles (EVs), China relies almost entirely on chips imported from Europe, the United States and Taiwan. Globally, new orders are backed up by an average of about a year, according to a Reuters survey of 100 automotive chips produced by the five leading manufacturers. The global chip shortage over the past two years - caused by pandemic supply chaos combined with booming demand - has transformed what had been a high-volume, low-margin trade into one with the potential for wealth-spinning deals, he says.Īutomotive chip order times remain long around the world, but brokers like Pang and thousands like him are focusing on China, which has become ground zero for a crunch that the rest of the industry is gradually moving beyond. The 58-year-old, who declined to say what he himself had paid for the microcontrollers (MCUs), makes a living trading excess electronics inventory that would otherwise be scrapped, connecting buyers in China with sellers abroad. "The automakers have to eat," Pang told Reuters. He says he has turned down offers for $100 each, or $6.2 million for the whole bundle, which is small enough to fit in the back seat of a car and is packed for now in a warehouse in Hong Kong. ![]() ![]() He's now looking to sell them to auto suppliers in the Chinese tech hub of Shenzhen for $375 apiece. ![]() Pang has bought 62,000 microcontrollers, chips that help control a range of functions from car engines and transmissions to electric vehicle power systems and charging, which cost the original buyer $23.80 each in Germany. From his small office in Singapore, Kelvin Pang is ready to wager a $23 million payday that the worst of the chip shortage is not over for automakers - at least in China.
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