If Semiconductor Prices Rise by 10%, Automakers' Operating Profit Estimated to Decrease by 1%
[Asia Economy Reporter Changhwan Lee] As the shortage of automotive semiconductors continues, semiconductor companies are reportedly showing signs of price increases. It is also pointed out that if the price of automotive semiconductors rises, automobile companies' profits could significantly decrease or retail prices of cars could increase.
According to Japan's Nihon Keizai Shimbun (Nikkei) on the 24th, the Japanese semiconductor company Renesas recently informed its trading partners of its intention to raise prices for automotive semiconductors such as 'power semiconductors' that control voltage and 'microcontrollers' that control driving distance. Toshiba has also started negotiations to increase prices for automotive power semiconductors.
In addition to Renesas and Toshiba, top global automotive semiconductor companies such as NXP and STMicroelectronics have recently been pushing for product price increases. Foreign media reported that the price increase rates they are demanding range from as low as 10% to as high as 20%.
Automotive semiconductors are currently in short supply compared to demand, causing serious problems such as production disruptions at global automakers. Ford recently closed its Louisville, Kentucky SUV plant in the U.S. and plans to suspend operations at its Saarlouis plant in Germany until the 19th of next month.
The Volkswagen Group expects production disruptions of about 100,000 units in the first quarter in China, North America, and Europe due to semiconductor shortages. Within the group, Audi postponed production of luxury models in January and announced that 10,000 employees will be on leave. Chrysler, Toyota, and others are in similar situations.
This is analyzed to be because semiconductor companies reduced automotive semiconductor production and increased IT-focused production last year as automobile demand decreased due to the COVID-19 pandemic.
If automotive semiconductor prices rise, automobile production costs will increase, potentially lowering companies' profitability. Retail prices that consumers pay may also rise.
Hana Financial Investment predicted that if semiconductor purchase prices uniformly rise by 10% due to supply shortages, production costs would increase by about 0.18%, and both automakers and parts manufacturers would experience a decrease in operating profit in the 1% range. In case of production disruptions, a 0.5% decrease in operating profit per 10,000 units is expected.
There is also a forecast that this phenomenon will continue for a considerable period. Researcher Seonjae Song of Hana Financial Investment analyzed, "The automotive semiconductor shortage is caused by a temporary supply-demand imbalance due to semiconductor companies such as NXP, Infineon, and Renesas focusing on producing other industrial semiconductors with relatively high margins and steady demand, while automobile production recovered faster than expected after COVID-19."
Researcher Song predicted, "Even if semiconductor companies expand production lines, it will take at least six months or more."
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