IHS Markit analysts Mark Fulthorpe and Phil Amsrud deliver the latest insights into the global semiconductor shortage, automotive supply chain challenges and global impacts on light vehicle manufacturing, including the latest forecasts from IHS Markit, which reflect the impacts on the light vehicle production through 2022. The estimates here do not include Toyota’s latest announcement and all others that have followed since the beginning of this week.
The capacity of wafers and semiconductors remains limited
For the first half of 2021, the semiconductor shortage problem was mainly wafer, front-end capability. The good news is that the disruptions due to the fire at Renesas’ Naka plant and the Texas ice storm that hit NXP, Infineon and Samsung Fab are largely behind us. The wafer factory’s capacity remains limited, but with these plant outages behind it, the impact is less than in the first half. Having wafers is necessary to make integrated circuits (ICs) but it is not enough. The front-end process is followed by the back-end assembly and testing process, which is another challenge.
While front-end processing turns a 200mm or 300mm raw silicon wafer into thousands of dice, each die must be packaged to provide a complete IC that can be soldered onto a circuit to be part of a unit of electronic control (ECU).
“Wafer fab capacity got all the attention earlier this year, and rightfully so, but if you can’t put the mold in a package so it can fit into an ECU, then you still can’t make and sell a. ‘car”.
– Phil Amsrud, Senior Principal Analyst, IHS Markit
Once processed, the wafers are sent to the assembly and test site to be cut, packaged and tested before sending them to a customer to be inserted into an ECU and then into a car.
Constraints in the backend process can interrupt the supply chain just like constraints in the front end process. During the first half of 2021, wafer fab capacity constraints were causing the most disruptions and receiving the most attention, but now that they have improved, other related constraints in obtaining leadframes, substrates and resins are attracting attention.
COVID-19 still has an impact on the supply chain
Unlike capacity constraints in wafer fabs, which primarily affected automotive MCUs, assembly capability constraints affect all types of semiconductors, including sensors, power supplies, and discrete. Assembly and test locations are concentrated in China, South Korea, Japan, Singapore, Philippines, Indonesia, Thailand, Vietnam and Malaysia. With the exception of Singapore and Malaysia, according to the Center for Strategic and International Studies, vaccination rates are less than 6 percent for many of these countries. Malaysia was recently closed due to the COVID-19 outbreaks and its vaccination rate is nearly 12%. Many of these countries have seen their average infections rise in the past 2 weeks, and the ongoing threat of COVID-19 affecting workforces in other countries is real. This threatens the same operators at assembly and testing sites, as well as the workers needed to move finished products to distribution hubs for global distribution.
Like wafer fab capacity, extended packing capacity is required. However, the margins in assembly and testing are a fraction of those in wafer fabs, so there is more hesitation in adding capacity speculatively. There is also a shortage of assembly equipment, with some lead times increasing to 40 weeks. One of the main reasons the lead times for this equipment have increased is because they can’t get semiconductors. In short, the equipment needed to produce more semiconductors is limited in availability because they can’t get enough semiconductors.
As a result, IHS Markit expects the semiconductor shortage across the automotive industry to extend into the first quarter of 2022 and possibly the second quarter. Both Intel and Infineon have warned that the situation could persist throughout 2022. Therefore, while improvements in wafer capacity have improved, the situation is still fraught with challenges.
Implications on Global Light Vehicle Production Forecasts – The latest update reflects an 8.3% increase over 2020
The global forecast for light vehicle production in 2021 is now 80.78 million units with our latest release for August. This represents an 8.3% increase from 2020 levels.
“Production lost due to semiconductor supply chain disruption is estimated to have reached 1.44 million units in the first quarter and 2.60 million units in the second quarter. Visible downtime in the third quarter is now equal to 1.60 million units, underlining the assessment that the third quarter will continue to experience disruptions, and this is becoming more significant. impact will be between 1.8 and 2.1 million units for the quarter if the inactivity rate we currently see was to continue through September.We expect the fourth quarter to be exposed to ongoing outages and this outage is now expected to extend to the first quarter of 2022. The second quarter of 2022 could be where we seek supply stabilization, with recovery efforts being starting only from the second half of 2022.
For the full year, taking the estimates for the third and fourth quarters, plus the losses already identified in the first half of the year, this would put the full-year risk associated with the semiconductor shortage between 6.3 million and 7. , 1 million units globally, according to IHS Markit estimates. “
– Mark Fulthorpe, Executive Director, Global Light Vehicle Forecast, IHS Markit
The situation in the third quarter was undermined by some delay in Renesas. Although production capacity has been restored, the ability to fulfill shipments may not be possible until September. We are also seeing further volatility due to COVID-19 blocking measures in Malaysia, where a lot of backend chip packaging and testing is done. As this is more labor intensive than wafer manufacturing processes, the business is more easily affected by public health measures that impact workforce participation.
In light of these developments, we expect the fourth quarter to be exposed to ongoing outages and this outage is now expected to extend into the first quarter of 2022. The second quarter of 2022 could be where we seek supply stabilization, with efforts recovery that now only start from the second half of 2022.