TSMC exhorts businesses to create automotive IC buffer stock immediately.

As cars grow more intelligent and electric, they will need more chips. A TSMC executive warned on Thursday that given the recent decline in chip demand from PCs and cellphones, businesses should start stocking up on automotive ICs. Otherwise, another semiconductor scarcity might affect the automotive sector.

TSMC’s Cheng-Ming Lin, director of automotive and MCU business development, made the statement at Semicon Taiwan 2022’s Global Smart Vehicle Executive Summit.

The automotive supply chain is substantially longer and more complex than the PC or smartphone sectors. As the top semiconductor foundry in the world, Lin claimed that TSMC occasionally occupies “Tier 6” or “Tier 7” in the supply chain.

According to Lin, customers from the automotive sector cancelled their orders with TSMC in 2020 because COVID-19 was impeding the manufacture of vehicle OEMs. As demand increased, PC and smartphone manufacturers seized the opportunity and placed additional orders.

Lin claimed that at the time, OEMs were unaware that other industries would utilise TSMC’s capacity since they were not familiar with how foundries operate. Since then, TSMC has been teaching its automotive clients about the problem.

Lin implores car OEMs and firms specializing in automotive ICs to start building their buffer stock since the burgeoning PC and smartphone markets have slowed down.

“You’ll have chip scarcity again,” the director warned, “if you missed the opportunity again and the (PC and smartphone) market heated up.”

He continued by saying that during the 2011 Tohoku earthquake and tsunami in Japan, which severely damaged its manufacturing, Toyota Motor realized the value of comprehending supply networks and building inventory. As a result, the automaker created a more reliable IC buffer stock and suffered less during the recent shortfall.

Lin added that TSMC will fully fulfill the demands of the automobile industry. It is obvious that both the acceptance rate and the advancement of autonomous driving technologies will increase. He claimed that for now, 10 to 12 sensors are needed in a car with Level 1 autonomous driving features. The number will rise to 40 or maybe more when the industry advances to Level 4 or 5.

Lin, on the other hand, asserted that EV battery prices must decrease in order for vehicles to be outfitted with more technology. It would be difficult to add more ICs if prices remained high.

Frank Huang, the chairman of the Taiwan Advanced Automotive Technology Development Association (TADA), stated that the entire cost of the chips used by a car today is between US$500 and US$600 at the start of the smart vehicle summit. As cars continue to advance, the price will increase to an average of US$2,000 and US$5,000 for some high-end models. In the future, car electronics may outperform PCs and cellphones in terms of potential, he continued.

According to Huang, businesses previously concentrated on increasing the dependability of automotive chips. However, since Tesla became the market leader and prioritized modularization, as Huang predicted would be the trend, the situation has shifted.

In addition, significant players in the global ICT sector, including certain system suppliers, have moved into the automotive electronics market, according to Chuen Huei Hung, director of the Market Intelligence and Consulting Institute (MIC) at the Institute for Information Industry (III).

Hung predicted that between 2022 and 2025, the segment’s worldwide compound annual growth rate (CAGR) may be at least 10%. Currently, electric vehicles make up the majority of automotive electronics on the bill of materials (BOM), with gasoline cars making up 70%. Hung predicted that by 2030, EVs would rewrite history and make up 70% of all electronics.

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