The supply of automotive microcontroller units (MCU) and power insulated-gate bipolar transistors (IGBT) is expected to remain short in 2023, according to sources in the car industry supply chain.
European, American, and Japanese automotive IDMs are looking to negotiate foundry prices for 2023 with Taiwanese wafer foundries; however, Taiwan-based foundries are expected to raise prices next year to cope with rising material costs and to prevent profit margins from eroding.
Foundries will have to adjust production capacity for automotive-grade demand, which has a higher investment cost than that of consumer products, according to sources. As such, foundries will only consider price negotiations for large orders. General automotive orders will be subject to planned price hikes.
Foundries revealed that international tier-1 foundries have carried out price negotiations and were more flexible than with consumer-end customers. They agreed to follow market conditions and negotiate when adjustments were necessary instead of forcing foundries to reduce prices.
There are also IDMs and tier-1 customers that increased orders to avoid the component shortages of the last two years and the impact on the vehicle manufacturing process.
At this moment, it is most important for automotive supply chain companies to get their hands on enough components, particularly components in short supply, sources said. If they are unable to, inventory costs will continue to rise.
Most mainstream automotive supply chain players believe the automotive chip shortage will continue in 2023, including MCUs and power IGBTs. As such, ensuring sufficient supply is the main focus. Volkswagen recently stated it has no expectation that the automotive chip shortage will be solved in 2023.
Whether or not component prices will increase again in 2023 is still dependent on a number of factors, including inflation, wars, and energy crises, which are also affecting consumer purchasing power, sources said, adding that automakers are also concerned about on-hand order bubbles.
Sources noted that the component shortages have created structural changes to the automotive supply chain, which is now focusing more on high-end cars, leading to a crowding out more affordable car models.
Still, affordable cars are the mainstream for consumers. Sources noted that the excessively high cost of components is the biggest challenge for affordable vehicle models. With support from foundries, long-term supply and demand can co-exist and grow.