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IHS Markit analysts Mark Fulthorpe and Phil Amsrud offer the
latest analysis on the global semiconductor shortage, automotive
supply chain challenges and global light vehicle production
impacts, including the latest IHS Markit forecasts, reflecting
light vehicle production impacts well into 2022. The estimates here
do not include the latest announcement by Toyota and any others
that have followed since the beginning of this week.
Wafer and Semiconductor Capacity Remains
Tight
For the first half of 2021 the semiconductor shortage issue was
mainly that of wafer, front-end capacity. The good news is the
disruptions due to the fire at Renesas's Naka facility and the ice
storm in Texas that impacted NXP, Infineon and Samsung fabs are
largely behind us. Wafer fab capacity remains tight, but with those
plant disruptions behind us, the impact is lower than in the first
half. Having wafers is necessary to make integrated circuits (ICs)
but not sufficient. The front-end process is followed by the
back-end assembly and test process, which is another challenge.
While front-end processing transforms a raw 200mm or 300mm
silicon wafer into thousands of dice, each die needs to be packaged
to provide a complete IC that can be soldered onto a circuit board
to be part of an electronics control unit (ECU).
"Wafer fab capacity got all the attention early this year,
and rightly so, but if you can't put the die into a package so it
can be put into an ECU, then you still can't produce and sell a
car."
-- Phil Amsrud, senior principal analyst, IHS
Markit
Once the wafers are processed they are sent to the assembly and
test location to be diced, packaged and tested before sending them
to a customer to be placed into an ECU and then into a car.
Constraints in the back-end process can disrupt the supply chain
just like the constraints in the front-end process. During the
first half of 2021, wafer fab capacity constraints were causing the
greatest disruption and getting the most attention, but now that
those have improved, other related constraints in getting
leadframes, substrates and resins are getting attention.
COVID-19 Still Impacting Supply Chain
Unlike the capacity constraints in wafer fabs, which was
impacting mainly automotive MCUs, assembly capacity constraints
impact all semiconductor types including sensors, power supplies
and discretes. 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, the vaccination rates are reported to be less than 6% for
many of these countries, according to the Center from Strategic and
International Studies. Malaysia has been shutdown due to COVID-19
outbreaks recently and its vaccination rate is almost 12%. Several
of these countries have seen their average infections increase over
the past 2 weeks, and the ongoing threat of COVID-19 impacting
labor forces in other countries is real. This threatens the
operators at the assembly and test locations themselves as well as
the workers necessary to move the finished products to distribution
hubs for global distribution.
Like wafer fab capacity, there is a need for expanded packaging
capacity. However, the margins in assembly and test are a fraction
of those in wafer fabs, so there is more hesitation to add capacity
speculatively. There also is a shortage of assembly equipment, with
some lead times increasing to 40 weeks. One of the main reasons the
lead times for this equipment has increased is because they cannot
get semiconductors. In short, the equipment needed to make more
semiconductors has limited availability because they cannot get
enough semiconductors.
As result, IHS Markit expects the semiconductor shortages across
the automotive sector now extending into Q1 2022 and possibly into
Q2. Both Intel and Infineon have cautioned that the situation may
persist throughout all of 2022. So while improvements in wafer
capacity has improved, the situation is still fraught with
challenges.
Global Light Vehicle Production Forecast Implications -
Latest Update Reflects 8.3% Increase over 2020
The global forecast for light vehicle production in 2021 now
stands at 80.78 million units with our latest August release. This
represents an 8.3% increase over 2020 levels.
"Output lost to disruption to the semiconductor supply chain
is estimated to have reached 1.44 million units in Q1 and 2.60
million units in Q2. Visible downtime in Q3 now stands at 1.60
million units underlining the assessment that Q3 will continue to
see disruption, and this is becoming more significant. While we do
not expect to see levels of disruption like those in Q2, it now
seems highly likely that the impact will be in the range of 1.8 to
2.1 million units for the quarter if the rate of downtime that we
currently see was to continue through September. We expect Q4 will
be exposed to ongoing disruption and this disruption is now
expected to spill over into Q1 2022. Q2 2022 may be the point at
which we look for the stabilization of supply, with recovery
efforts now starting only from H2 2022.
Across the full year, taking the estimates for Q3 and Q4, in
addition to the losses already identified in the first half of the
year, this would put the full-year risk associated with
semiconductor shortages between 6.3 million to 7.1 million units
globally, according to IHS Markit estimates."
-- Mark Fulthorpe, Executive Director, global light vehicle
forecasting, IHS Markit
The situation in Q3 is undermined by some delay at Renesas.
Though manufacturing capacity has been restored, the ability to
fulfil shipments may not be possible until September. We are also
seeing additional volatility due to COVID-19 lockdown measures in
Malaysia where many back-end chip packaging and testing operations
are performed. As this is more labor-intensive than the wafer
fabrication processes, activity is more easily affected by public
health measures that impact workforce participation.
In view of these developments, we expect Q4 will be exposed to
ongoing disruption and this disruption is now expected to spill
over into Q1 2022. Q2 2022 may be the point at which we look for
the stabilization of supply, with recovery efforts now starting
only from H2 2022.