[The Crisis of K-Semiconductors] Car Semiconductor Shortage to Last 3 More Years... No Companies Willing to Manufacture

②No Escape from Vehicle Semiconductor Shortage
Global Vehicle Production Disrupted by 2.75 Million Units
Autonomous Vehicle Boom Increases Demand
Low Added Value Deters Market Entry

[Asia Economy Reporter Kiho Sung] Concerns have emerged that the shortage of automotive semiconductors, which began at the end of 2020, will continue until as late as 2025. Due to the imbalance in semiconductor supply and demand, the finished car industry has taken a direct hit in vehicle production, and parts manufacturers are also experiencing successive production disruptions. Customers' new car lead times (the time from order to product receipt) have currently extended up to 30 weeks, but finding a solution remains difficult. Although demand is surging with the spotlight on eco-friendly vehicles such as electric cars, it is difficult for new players to enter the automotive semiconductor market, which has low profitability and high entry barriers.

According to Eugene Investment & Securities and related industries on the 21st, as of the 17th, the global vehicle production shortfall due to automotive semiconductor shortages was 2.75 million units. The forecasted figure reaches 3.62 million units. This is an increase of 500,000 and 560,000 units respectively from the previous figures of 2.25 million and 3.06 million units as of the 19th of last month.

Automotive semiconductors are components that control the electronic equipment of vehicles, acting as the brain. They are key elements in all areas, including air conditioning systems and engines. Especially with technological advancements, eco-friendly and autonomous vehicles are gaining attention, leading to a significant increase in demand for automotive semiconductors. According to IHS Markit, the automotive semiconductor market is estimated to grow from $38 billion in 2020 to $67.6 billion by 2026.

According to the "Automotive Semiconductor Supply Chain Ecosystem" report published by the Korea Electronics and Telecommunications Research Institute, the cost of automotive semiconductors per vehicle was $470 as of last year. This accounts for about 2% of the vehicle production cost. However, with the transition to electric and autonomous vehicles, this proportion is expected to rise to over 6%. Typically, a gasoline internal combustion engine vehicle contains about 200 to 300 semiconductors, hybrid vehicles have 500 to 700, and electric vehicles have around 1,000 semiconductors. Autonomous vehicles are known to require more than 2,000 semiconductors due to the increased installation of cameras, radars, and LiDARs.

The most critical component acting as the "brain" in automotive semiconductors is the Microcontroller Unit (MCU). According to KOTRA, South Korea imports approximately 97-98% of the MCUs needed for automobile production.

Although demand for automotive semiconductors has surged rapidly due to COVID-19 and the rise of eco-friendly vehicles, it is difficult to find new entrants in the market. This is because the added value of automotive semiconductors is lower compared to semiconductors for smartphones or artificial intelligence, and they account for only about 2% of vehicle production costs, making it hard to gain significant profits.

Another factor is that automotive MCUs have proprietary architectures, making it difficult to use other companies' products, and the high safety and durability standards required due to the extreme operating environments of vehicles. As a result, foundries without experience in automotive MCU production are not entrusted with manufacturing, which further exacerbates the supply shortage.

Unlike memory semiconductors, automotive semiconductors operate under a "small volume, diverse product" production system. The MCU market is dominated by Japan's Renesas with 30% and the Netherlands' NXP with 26%. These companies mainly focus on design, while production is overwhelmingly handled by Taiwan's TSMC, which accounts for over 75% of global volume. However, automotive semiconductors make up only about 3% of TSMC's total sales.

Automotive semiconductors are mainly produced on older 200mm (8-inch) wafer fabs rather than the latest 300mm (12-inch) fabs used by companies like Samsung Electronics, making it difficult for companies to expand 8-inch production facilities.

Therefore, the consensus is that the automotive semiconductor shortage will be prolonged. Professor Hogun Lee of Daeduk College's Department of Automotive Engineering predicted, "No matter how quickly the situation improves, difficulties will continue until the end of this year or early next year." Professor Pilsoo Kim of Daelim University's Department of Future Automotive Engineering forecasted, "In the worst case, the automotive semiconductor shortage will persist until 2025."

Voices are also calling for preparation to cope with the surge in demand for automotive semiconductors in the era of eco-friendly vehicles. Hwangsoo Jeon, a senior researcher at the Korea Electronics and Telecommunications Research Institute, said, "Automotive semiconductors are not a main production item for domestic foundries, so government incentives for new investments and tax support are necessary." He added, "As the shortage of semiconductor industry manpower intensifies, urgent measures such as increasing department enrollments, recruiting professors with field experience, establishing industry contract departments, and expanding university semiconductor research centers are needed."