Europe's carmakers remain vulnerable – even if many destroyed supply chains have only just been repaired after the corona crash. But an indispensable group of components is missing more and more frequently: semiconductor modules, the heart of all electronic systems and microchips. Some auto production lines have to close again because supplies are stagnating. And simply switching to other partners is often not an option because the total amount available is already extremely scarce.
The German electronics industry sees a very mixed situation, at least with regard to the short-term auto business. “Since spring, the decline in the auto industry in the wake of the corona situation had initially decreased significantly,” explains the managing director of the ZVEI industry association, Wolfgang Weber. “Chip manufacturers had to change their capacities and find new customers, which has been successful.”
There has been an upswing in entertainment electronics with TV, hi-fi or game consoles. And semiconductor requirements are also high in sectors such as medical technology with ventilators and monitors or the core IT business. The car production has now picked up again faster than expected. The chip manufacturers therefore “needed a few months to convert their production again and to be able to meet demand again. Unfortunately, it doesn't get any faster – the car manufacturers should understand this and take it into account more in the future.”
In all of this, one shouldn't forget that high capacity utilization is important for electronics suppliers. The manufacture of chips, sensors or controllers is expensive, and new factories often require investments in the double-digit billions. Manufacturers would have had to realign their delivery targets.
Industry in contact with government
Overall, the pandemic year 2020 had relatively little impact on the globally closely interlinked semiconductor industry with German representatives such as Infineon, Carl Zeiss SMT or Siltronic / Wacker. After it had been below average in 2019, there was a 4 percent increase in sales on the world market to 428 billion dollars (about 355 billion euros). However, the early recovery in its own sales is causing acute problems for the automotive industry. “Intensive work is being done to ensure the supply of semiconductors,” says the VDA in Berlin. They are “in contact with the federal government”.
At Volkswagen, Audi and Daimler, for example, shifts had already been canceled recently. There is also more short-time work again. At the VW parent plant in Wolfsburg, the shutdown was extended after the New Year, and a reserve decision on possible reductions applies to the Braunschweig components plant. Before Christmas, the largest car company had complained of a “massively restricted delivery situation”. Works council chief Bernd Osterloh warned: “We have a serious problem – but that is not just a problem for the auto industry.” The VDA is also concerned: “The global automotive industry and electronics suppliers are also affected by this shortage.” External processors and automotive suppliers such as Hella or Continental spoke of bottlenecks.
The current peak in demand for semiconductors is also expected to come as a surprise to chip manufacturers in Asia. The raw material markets are likely to play a role as well. In its 2019 monitoring report, the German Raw Materials Agency (DERA) – a specialist authority in the Federal Institute for Geosciences and Natural Resources (BGR) – included silicon as one of the resources with “high potential procurement risks”.
Several developments in China have increased the pressure, says DERA boss Peter Buchholz. There is silicon in abundance – but 20 large smelting plants that are necessary for its processing were last shut down in the People's Republic. One reason for this is said to be insufficient electricity production from hydropower after a lengthy drought in some regions. “And corona-related production losses have to be made up for,” added Buchholz.
China's largest silicon producer
It is not known exactly how high the proportion of affected capacities in China is. But if you look at production figures, the underutilization becomes clear. According to BGR, China accounted for around 2.2 million tons of the total annual global production of silicon recently of around 3.15 million tons – with an actually usable capacity of 5 million tons in the country.
“It goes through the supply chain”, says the expert, whose team analyzes raw material trends for the German government. China's power is still considerable here. The USA, Norway, Brazil, France, Australia, Russia and Germany followed by a large margin among the most important producer countries.
In addition, the solar industry is involved as a competitor in the sourcing of semiconductors – although the required purity of the silicon is not as high here as with microchips. And China is also a main producer of other semiconductor raw materials such as gallium compounds, which are used in the new 5G mobile communications. The inventory has dropped sharply here, and the price for a kilogram of gallium shot up from $ 150 to $ 260 last year.
Buchholz sees no risk of long-term supply problems. But that is not a reason to give the all-clear. The ZVEI emphasizes that Europe's chip manufacturers need to develop even more of their own production facilities. There is talk of “technological sovereignty”. Because there will also be more demand in the medium term from the automotive and mechanical engineering sectors – the buzzwords are autonomous driving and Industry 4.0.
