Automotive chip price set to increase due to supply shortage

Global chip supply shortage could lead to interruptions in automobile production in China and there can be increase in the price of automotive chip from global leaders.
Hyundai and car technologyAutomotive chip supplier NXP Semiconductors has told its customers that it must raise prices on all products because it is facing a significant increase in materials costs and a severe shortage” of chips, Reuters reported.

“To address the unforeseen increase in costs from our suppliers, we reluctantly must raise pricing on all products,” the Nov. 26 letter to the chipmakers customers said. NXP confirmed the authenticity of the letter but declined to comment further.

Germany’s Infineon Technologies said it was increasing its investments to ramp up a new chip factory in Austria.

“We have already factored in certain growth for car production in 2021. Accordingly, we will adjust our global manufacturing capacities,” the company said in a statement.

German auto suppliers Continental, Bosch and Volkswagen, the world’s largest carmaker, warned about the shortage of semiconductor components.


Volkswagen said on Friday that a global chip supply shortage could lead to interruptions in automobile production in China.

Volkswagen, the biggest foreign automaker in China, said on Friday that China’s overall auto production could be interrupted after the COVID-19 pandemic disrupted chip supplies globally for some electronic components.

“The chip supply for certain automotive electronic components has been affected due to uncertainties caused by the pandemic,” a Volkswagen representative told Reuters in an emailed statement.

“This has led to a potential interruption in automotive production, with the situation getting more critical as demand has risen due to the full-speed recovery of the Chinese market,” the statement, which refers to China’s overall auto production and not specifically Volkswagen’s, said.

Volkswagen also said it was closely monitoring the situation and had already started coordinating with suppliers to take appropriate countermeasures.


Germany-based auto supplier Bosch said it too was seeing supply chain bottlenecks for certain components.

“No supplier can elude this market development. We are in close contact with our suppliers and customers to maintain the supply chains as much as possible despite the tense market situation,” Bosch said.


“Although semiconductor manufacturers have responded to the unexpected demand with capacity expansions, the required additional volumes will only be available in six to nine months,” Continental said on Friday. “Therefore, the potential delivery bottlenecks may last into 2021.”

China automotive market

China is expected to sell more than 22 million vehicles in the first 11 months of 2020, down just 3 percent from the same period a year earlier.

China is likely to import at least $300 billion worth of semiconductors for the third year running, Wei Shaojun, vice-chairman of the China Semiconductor Industry Association, told the World Semiconductor Conference on Wednesday.

“After 2013 our chip imports exceeded $200 billion. In 2018 it exceeded $300 billion and was still at $300 billion in 2019. If nothing out of the norm happens this year, it will still be $300 billion or more,” he said, according to a video of the conference that was published by its organisers online.

Baburajan Kizhakedath

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