RYOSUKE EGUCHI, Nikkei staff writer
TOKYO — In a sign that the global supply of chips for the auto industry is improving after months of shortages, inventories have risen for the first time in nine months at leading suppliers, Nikkei has learned.
Inventories were up in value terms at the end of September at Japan’s Renesas Electronics, Dutch supplier NXP Semiconductors, Germany’s Infineon Technologies, Switzerland-based STMicroelectronics and U.S.-based Texas Instruments.
With demand still running high, the outlook for the months ahead remains unclear. But the inventory upturn suggests that, thanks in part to chipmakers’ increased output, the supply constraints that forced car companies to halt assembly lines through the summer are easing.
Chipmakers saw sales surge starting in the October-December quarter of 2020 while inventory growth lagged. As output struggled to keep up with demand from automakers, inventory levels worsened over the next few quarters.
Conditions took a turn for the better in the July-September quarter of this year. Total inventories at the five chipmakers rose 0.7% on the year, marking the first gain in three quarters. Four of the five saw an increase in inventories.
One problem that had held inventories back was production stoppages. Extreme weather knocked out chip production in Texas in early 2021, and pandemic-related restrictions hurt Southeast Asian suppliers. Renesas, a key supplier of microcontrollers to such automakers as Toyota Motor, suffered a fire at a plant northeast of Tokyo that interrupted output there.
Because of the large number of steps between restarting a production line and shipping finished products, output took time to restore.
Another bottleneck was a lack of capacity at contract chipmakers, or foundries. Foundries have since shifted more of their production lines to making automotive chips, but earlier on they tended to favor higher-profit output, such as chips for smartphones.
Both chipmakers and their customers say the third quarter of 2021 marked a turning point. Supply shortages of automotive chips are expected to be greatly reduced starting in the July-September quarter, C.C. Wei, CEO of Taiwan Semiconductor Manufacturing Co., the world’s largest foundry, said in July. Germany’s Continental, one of the world’s top auto parts suppliers, said on its latest earnings call that “we do believe the worst of the semiconductor shortage is behind us.”
But the risk of further shortages has not faded entirely. Automakers plan to make up for their July-September production cutbacks, so their appetite for chips will remain ravenous. Auto companies’ inventories are at historically low levels, said Takeshi Kataoka, general manager of Renesas’ automotive solutions business.
More time will be needed for chip inventories to recover across the supply chain, including parts makers and trading houses. “We continue to believe that it will take multiple quarters before we are able to rebuild on-hand and channel inventories to our long-term target levels,” NXP Semiconductors Chief Financial Officer Bill Betz said on the company’s most recent earnings call.
Akira Minamikawa, a semiconductor-industry analyst at research firm Omdia, predicts that the automotive chip shortage to take until the spring of 2022 to end.