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Automotive Semiconductor Market Players Hope for a Revival in Passenger Vehicles Segment

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Automotive Semiconductor Market Players Hope for a Revival in Passenger Vehicles Segment

The global automotive semiconductor market is poised to increase at a CAGR of 7 % during the assessment period from 2020-2030. The growth is primarily attributed to a growing demand for usage of automotive semiconductors in camera-based sensors, 3-D mapping technology applications, Matrix LEDs for electric vehicles, camera-based sensors, LiDAR sensors, and others are projected to allow growth in the market.

“Digitally equipped manufacturers are implementing their mobile platforms for evolving car platforms and in-car entertainment. Technology-based manufacturers have collaborated with media-streaming devices and services companies due to core capabilities and their aggressive capital investment. Thus, due to digital connectivity for instance vehicle-to-vehicle communication, the market is projected to fuel up during the assessment period,” states the Future Market Insights analyst.

Key Takeaways

  • North America is anticipated to remain lucrative throughout the assessment period 2020-2030.
  • The micro-components (processors) segment is anticipated to witness an accelerated expansion of 7.0% during the projected period.
  • The passenger vehicle types segment will continue to lead the global market among other segments.
  • The safety application category is likely to rise at a higher pace over the assessment period.
  • The automotive industry will remain a key beneficiary throughout the projected period.

Automotive Semiconductor Market – Drivers

  • The growing production of vehicles across several nations has been complementing the market growth.
  • Increasing preference for best-in-class features and greater performance in motor vehicles boost the market demand.
  • Steady growth in the need for safety attributes in ultra-modern vehicles will propel market growth.

Automotive Semiconductor Market – Restraints

Factors such as continuous optimization of component size, maintaining balance amid quality and cost of the product, and the rising cost of the overall vehicle are continuously creating challenges for the automotive semiconductor market

COVID-19 Impact on Automotive Semiconductor Market

Given the debilitating effect of the COVID-19 pandemic on the automotive semiconductor market, market players are vying for prospects to stay afloat in the market scenario. The digital & electrical vehicles being the chief source of the automotive semiconductors need, the global market is likely to decrease by 5% towards 2020 end. Despite the entire shutting down of the manufacturing plants throughout the lockdown, the total year-to-year expansion of the market is projected to be 5%-8% through 2021.

Regional Analysis

China is the leading automotive manufacturing country in the world, and this factor alone is projected to boost shipments of automotive semiconductors in the nation over the years to come. Supportive government initiatives to boost semiconductor manufacturing and the rising use of automobile computer chips are prominent factors that will govern automotive semiconductor demand through 2030.

Competitive Landscape

Major companies identified in the global Automotive Semiconductor market include Samsung Semiconductors, Intel Corporation, NVIDIA Corporation, NXP Semiconductors, Texas Instruments Inc. (TXN), Broadcom Inc. (AVGO), Qualcomm Inc. (QCOM), Taiwan Semiconductor Manufacturing Co. Ltd. (TSM), ASE Technology Holding Co. Ltd. (ASX) and Micron Technology Inc. (MU).

semiconductor PMIC

A Holistic Approach to Strengthening the Semiconductor Supply Chain

The COVID-19 pandemic brought the consequences of offshoring semiconductors into sharp relief for American consumers and businesses. When the pandemic struck—snarling global supply chains and spiking demand for consumer electronics—American businesses and consumers were left without the inputs and supplies they had come to rely upon. This supply chain will remain at risk: Its core nodes remain in locations with high geopolitical uncertainty—none more important than Taiwan, whose semiconductor industry Beijing jealously eyes.

Such supply chain vulnerabilities alongside the recognition that semiconductors represent a strategic resource have inspired a push in Washington to rebuild American chip manufacturing. In June 2021, the U.S. Senate, in a rare act of bipartisan consensus, passed the U.S. Innovation and Competition Act (USICA), which would spend $52 billion to bolster the American semiconductor industry. In February of this year, the House of Representatives passed similar legislation—the America COMPETES Act—along mostly party lines. House and Senate negotiators now must reconcile these bills. President Joe Biden argued in his State of the Union address that passing some version of this legislation was essential “to compete for the jobs of the future” and to “level the playing field with China.”

But reshoring the semiconductor supply chain is unlikely to resolve the supply-chain shocks caused by the pandemic: construction of the most important nodes, namely fabrication of the chips themselves, would require not only tremendous up-front costs, but possibly a steady stream of government assistance in perpetuity. As lawmakers on Capitol Hill iron out how best to position the United States to maintain access to a key technology, it’s worth considering what a more holistic strategy to address semiconductor availability might look like.

Here, we propose a two-pronged approach. First, the United States should focus on deepening its high-tech collaboration with supply-chain partners such as South Korea, Taiwan, or even Europe. The U.S. should also amend immigration rules to permit more skilled workers to enter the country, augmenting the talent pool during a period of labor shortages and increasing the competitiveness of U.S.-based industry. We recommend this combination of policies rather than the costlier and riskier proposition of reshoring the industry from the ground up. The United States may not return to its 40% semiconductor manufacturing market share from the 1990s, but these policies would nonetheless help boost domestic production from 10-12% of the global market and increase supply-chain resilience while minimizing potential efficiency losses from over-reliance on local manufacturing.

Semiconductors and supply chains

The rampant offshoring of chip manufacturing from the U.S. to places such as South Korea, Taiwan, and China made good economic sense for companies in pre-pandemic times. East Asia has cultivated a comparative advantage in semiconductor production by virtue of access to cheap inputs and labor. Turning back the tide, conversely, appears to be considerably more costly. Full-scale self-sufficiency by region, according to a Boston Consulting Group report, would require “$1 trillion in incremental upfront investment, resulting in a 35% to 65% overall increase in semiconductor prices and ultimately higher costs of electronic devices for end users.”

Perhaps more importantly, restoring American chip manufacturing capabilities requires much more than the erection of domestic factories. The production of semiconductor chips involves an intricate set of steps from design to front-end fabrication to back-end assembly, testing, and packaging. Such steps are carried out by different firms and countries that have developed comparative advantages in divergent pieces of the supply chain, such that no country has complete end-to-end control of chip manufacturing. Indeed, as Brookings nonresident senior fellow Chris Thomas notes, this hyper-specialization and complexity “makes semiconductors a winner-take-all industry” such that “the top one or two players in any given niche […] earn all the economic profits in that niche due to scale, learning efficiencies, and high switching costs to customers.”

U.S. companies are among the most important designers of microchips in the world, but the supply chain that supports their physical manufacturing is located thousands of miles away in East Asia. Seven of the top 10 (by revenue) fabless semiconductor design firms—those that design and market the hardware but outsource the manufacturing of silicon wafers to a foundry—are American companies, according to a Congressional Research Service report. But the fabrication facilities (foundries) that make the chips designed by firms like Nvidia and AMD are controlled by Taiwanese and South Korean companies. Other parts of the chain are also equally difficult to reproduce: The most important equipment suppliers are a Dutch and a Japanese firm—ASML and Tokyo Electronics. Back-end production, which is labor-intensive, is concentrated in Malaysia, Vietnam, and the Philippines. For large-scale reshoring initiatives, there’s simply a lot to reshore.

The specialization of the semiconductor supply chain means that efforts to reshore the industry will require more than just the construction of foundries in the United States. These factories will be unable to meet their production and cost targets without reliable access to inputs. Decades of competition among East Asian technology hubs have honed regional supply chains to cheaply and reliably deliver components and materials for semiconductor manufacturing. In the short term, access to critical supplies is likely to remain strained. Russia and Ukraine both provide key inputs for semiconductor manufacturing, such as nickel, palladium, and neon—and the Russian invasion of Ukraine is likely to throw yet another wrench in the global supply chain for chips. The semiconductor industry has sought to increase production, but according to U.S. government data, significant gaps between supply and demand remain. While congressional initiatives to restructure semiconductor supply chains may be aimed at longer-term resilience, the current state of the industry illustrates the complex logistical challenges facing any reshoring initiatives.

Addressing the broader nature of the supply-chain challenge is among the issues facing congressional negotiators trying to reconcile House and Senate bills aimed at boosting U.S. semiconductor manufacturing. The Senate version—the USICA—takes a relatively narrow view of the industries eligible for support, limiting it to microchip manufacturers. The House version—the America COMPETES Act—applies a wider lens and also provides funding for companies supplying equipment and materials used in manufacturing chips. However, the House bill also cuts about $200 billion for regional technology hubs promised in the Senate bill. Invariably, these bills are based on the assumption that the money will be remunerative and assuredly beneficial in propping up domestic industry.

A new era of industrial policy?

As the Senate and House negotiate to work out a compromise between the two pieces of legislation, there is reason to be skeptical about the wisdom of a policy that would reshore the semiconductor manufacturing base. Semiconductor manufacturing facilities will take several years to build. Intel broke ground on two chip factories in Arizona last September, a $20 billion expansion, but the foundry will not be fully operational until 2024. Even once fabrication plants are constructed, it is unclear whether they will be profitable without government assistance. While semiconductor supply chains remain strained, fewer COVID-19-related disruptions and the industry’s efforts to expand capacity may ease shortages in the medium term. The legislation, then, may be a long-term solution to a short-term problem.

The new facilities may bolster the manufacturing base, but companies are facing both blue- and white-collar labor shortages that are likely to be difficult to resolve because of unfavorable demographic, educational, and economic trends in the economy. The Intel plant’s promise of 7,000 construction jobs and another 3,000 permanent jobs therefore faces potential labor challenges. They may be resolved with higher wages, but this raises a different issue: Estimates suggest that the silicon wafers that TSMC is making in Arizona will be more expensive than those made in Taiwan, costs that will be passed along to consumers at a time when consumers are already paying more as a result of high inflation.

Government intervention to prop up the U.S. semiconductor industry and improve its competitiveness would be reminiscent of 20th century efforts to create “national champions” by offering subsidies to firms in domestically popular industries. Politicians have long campaigned successfully on reviving strategic industries, like steel and coal, in which the United States is comparatively disadvantaged, despite the fact that there is no consensus that industrial policy is efficacious. As Daniel Yergin and Joseph Stanislaw document in their book Commanding Heights, the adoption of industrial policies to support domestic industries tends to require a perpetual stream of government assistance to maintain a comparative advantage. A better way to improve the availability of semiconductors and improve the resiliency of the chip supply chain would be to embrace foreign expertise and talent rather than expensive unilateralism.

A third way: partnerships and talent promotion

Even if the United States can reshore some of its domestic manufacturing capacity, the gains will come at considerable cost. Supply-chain resilience should not rely on costly, long-term policies. The United States should be mindful that reshoring risks increasing costs for consumers and consider that countries such as Taiwan and South Korea have developed expertise and efficiency in semiconductor manufacturing and happen to be close American security partners. Foreign direct investment (FDI) in these countries, for example, might allow for a more assured supply of chips. Promoting the expansion of a cheaper foundry abroad, thus, might be far more economical than constructing an expensive one at home.

Furthermore, the United States should welcome foreign firms building manufacturing capacity in the United States, like TSMC’s $12 billion investment in Arizona and Samsung’s $17 billion investment in Texas. Despite these firms not being American, the investments in the manufacturing base are decidedly American, as are the supply-chain advantages brought by insulation from the geopolitical dynamics in Asia.

The United States has long excelled because of its human capital. Yet just as new plants are being built that will require high-tech labor, the United States faces engineering and manufacturing talent shortages. The semiconductor industry can promote STEM skills in universities, but the impacts of those investments will be felt in the medium- to long-term. The government can promote immigration policies that raise the ceiling for high-skilled labor to increase the competitiveness of the U.S.-based semiconductor industry.

In other words, the United States can try to have it both ways—hedging against geopolitical risk in Asia by welcoming investments in American manufacturing and promoting inward migration while also bolstering relations with allies and leading chip producers like South Korea and Taiwan. Doing so mitigates potential security risks without large sacrifices in economic efficiency. Indeed, the logic of comparative advantage that led semiconductor manufacturing to be offshored in the first place still applies today. Promoting “national champions” in an effort to reshore the entire supply chain would only drive up consumer costs at a time when inflation has become a political, economic, and ultimately a national-security liability.

Recent delivery passage in the U.S. Senate of comprehensive legislation aimed at boosting domestic manufacturing of semiconductors is helping to Stemming from the COVID-19 pandemic, the logistical bottleneck continues to reverberate around the world as carriers, shippers and third

Congressional Negotiations Ramp Up on Supply Chain, Semiconductor Package

Recent passage in the U.S. Senate of comprehensive legislation aimed at boosting domestic manufacturing of semiconductors is helping to set in motion formal negotiations with House lawmakers.

As the House prepares to consider the Senate-passed bill, bipartisan debate on a final version of the bill appears imminent.

The objective from sponsors of what’s termed as the Bipartisan Innovation Act is to resolve differences in versions of the Senate- and House-passed bills to arrive at legislation capable of receiving President Joe Biden’s signature before summer. A previous version of the bill was known as the U.S. Innovation and Competition Act (USICA).

A key provision sponsors plan to include in any final version is dedicating more than $50 billion to facilitate production of semiconductors. Supply chain bottlenecks have contributed to a slowdown of such semiconductor chips, which are said to be essential in everyday electronics and the commercial transportation landscape.

Sen. Maria Cantwell (D-Wash.), chairwoman of the Commerce Committee on freight affairs, repeatedly has urged colleagues to negotiate on the semiconductor, supply chain-centric measure.

“We have an opportunity to help establish, on a continued basis, American leadership in technology, to employ more people to help our country compete in the economy of the future. But we can’t do that if we don’t get legislation passed, and we can’t continue to wait for people who don’t want to go to [legislative] conference [negotiations],” Cantwell said prior to the Senate’s action on the bill.

“By 2030, there could be more than 10 million new jobs in clean energy, advanced manufacturing, communication and in computing. All of those, guess what, depend on us making sure that we do the right amount of [research and development] and making sure that we help in bringing U.S. manufacturing back to the United States,” the senator continued.

Expected to be tucked in the semiconductor bill are provisions from the Ocean Shipping Reform Act, versions of which have recently been approved by the House. A version sponsored by Sens. Amy Klobuchar (D-Minn.) and John Thune (R-S.D.) takes aim at the Federal Maritime Commission by requiring carriers to issue certain reports to the commission each quarter. The bill also would authorize the commission to self-initiate certain investigations partly related to late fees, and it would pave the way for the registration of shipping exchanges.

“Congestion at ports and increased shipping costs pose unique challenges for U.S. exporters who have seen the price of shipping containers increase four-fold in just two years, raising costs for consumers and hurting our businesses,” Klobuchar said in a statement. “Meanwhile, ocean carriers that are mostly foreign-owned have reported record profits.”

The White House has endorsed negotiations on the semiconductor legislative package on Capitol Hill. Press Secretary Jen Psaki affirmed, “We look forward to the House of Representatives moving quickly to start the formal conference process.

“We’ve made remarkable progress over the last year in rebuilding our industrial base, including by creating more manufacturing jobs last year than in any year in almost three decades, and by making a historic and long-overdue investment in our nation’s infrastructure.”

She added, “Competitiveness legislation like the Bipartisan Innovation Act is our chance to build on that success and create good-paying jobs, make more in America and lower prices for working families.”

Pressing lawmakers from the sidelines are key industry stakeholders. Tech and freight transportation firms have been sounding the alarm on the need to revamp domestic semiconductor production.

“Time is of the essence: American businesses in every sector across the economy are facing a semiconductor shortage, and the only way to alleviate the current supply-demand imbalance long term is to increase manufacturing capacity,” Intel Corp. CEO Pat Gelsinger told Cantwell and her colleagues on the Commerce Committee recently. “Polls consistently show Americans understand the importance of the chip-making industry to the U.S. economy and national security, and widespread support for congressional action to allocate federal funding for the industry.”

capacitors tariff global trade

Germany Expands Electrical Capacitor Imports 40% to Over $2B

IndexBox has just published a new report: ‘Germany – Electrical Capacitors – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

Germany, the second-largest importer in the global electrical capacitor market, increased purchases last year. In Q1-Q3 2021, its electrical capacitor imports totalled $2B, rising by 40% compared to the same period of 2020.

During Q1-Q3 2021, Germany imported electrical capacitors worth $2B, 40% more than in the same period a year earlier. Japan, China and South Korea remain the major providers of electrical capacitors to Germany. In Q1-Q3 2021, imports from China amounted to $333M, soaring by 55% against the same period in 2020. During that time, Japan expanded capacitor exports to Germany by 41% to $597M, while shipments from Korea surged by 34% to $147M.

Germany Electrical Capacitor Imports by Country

In 2020, the volume of electrical capacitors imported into Germany shrank markedly to 29K tonnes, which is down by -16.9% compared with 2019. In value terms, supplies fell markedly to $2B (IndexBox estimates).

Japan ($667M) constituted the largest supplier of capacitors to Germany, comprising 34% of total imports. The second position in the ranking was occupied by China ($319M), with a 16% share of total purchases. It was followed by South Korea, with a 7.7% share.

Overview of Global Electrical Capacitor Imports

Global capacitor imports totalled $31B in 2020. Multilayer ceramic capacitors ($19.1B) constituted the largest type of electrical capacitors imported worldwide, comprising 62% of global supplies. Aluminium electrolytic capacitors ($5B), with a 16% share of global imports, took second position in the ranking. Other types of capacitors comprised 22% of total supplies.

The largest capacitor importing markets were China ($8.8B), Hong Kong SAR ($5.4B) and Germany ($2B), together comprising 52% of global imports. The U.S., South Korea, Mexico, Singapore, Viet Nam, Malaysia, Thailand, the Czech Republic, Hungary and India lagged somewhat behind, comprising a further 29%.

Source: IndexBox Platform


Metal Shortages Add Concerns to Global Economy

As the global economy continues to throw curveballs at various industries, raw materials and associated manufacturers, distributors, workers, and consumers are among those feeling the bulk of the pressure. So, how can these effects be mitigated without costing consumers and company’s unreasonable amounts? A global leader in all things tungsten, Almonty Industries focuses on the mining, processing, and shipping of tungsten across the world. The company’s CEO, Lewis Black, shares the challenges automotive and energy companies are currently navigating and how these industries can overcome them in this exclusive Q&A.

What are some of the most significant impacts of the steel and metal shortages and what industries are being hit the hardest?

Black: From Almonty’s point of view and what we are doing with the tungsten industry in South Korea, the construction industry is definitely feeling the brunt of the impact. Even though the material is available, the price is extraordinarily high, and we are witnessing a huge escalation in costs and delay in delivery times.

The industry is moving along and accepting these challenges, but things are now taking longer to build and it is costing more money to accomplish. The redeeming quality is that money is still unbelievably cheap which has helped in mitigating these cost escalations.

Problems arise when inflation keeps rising and governments continue to raise rates to counter it, which is another issue. Now, companies with projects are optimistically moving forward because they have no choice. The increase in time it takes to build and its impact on the costs for labor can predictably cause a movement within labor unions demanding compensation for their workers to counter inflation.

How are the semiconductor and automotive industries affected by this?

Black: The semiconductor industry is experiencing shortages due to demand far outweighing supply. It is interesting because it is commonly assumed that the industry is a relatively straightforward product to produce, when in fact, it’s anything but. Creating this type of product is technically advanced and takes around nine weeks to make one semiconductor. From a tungsten point of view, one must pump tungsten gas into every semiconductor, so increasing capacity becomes a huge undertaking for the factory.

Are there any specific initiatives that can be taken to mitigate these challenges?

Black: As a manufacturer, you are caught in a tricky situation. You will continue to see rising costs and how much of that cost you can push onto the consumer is yet to be evaluated. There is an inherent apprehension about how much to pass on to the consumer. Consumer indexes and inflation rises of 4-5 percent are not the same for raw materials, in fact, it is much higher than these figures. We are seeing extra caution from manufacturers regarding the consumer aspect of it.

At this point, it is just a matter of time before we start seeing price escalations. As the saying goes, “No one can hold back a rising tide.”

Companies are very reluctant to pass off some of these costs because of the price gouging headlines and hearsay that does not apply to them. In Spain, for instance, energy cost is 400 percent higher than previously recorded, impoverishing millions of people. The response of the central government was to accuse the energy companies of price gouging and say they were going to introduce legislation to seize their profits and distribute them to the people. Of course, they have not done that because in a democracy you cannot just do that. It was an absurd proposition to even state because it had nothing to do with the energy companies – the market sets the price, not the companies.

That is exactly what manufacturers are reluctant to do – get caught in the crosshairs of this type of situation when passing costs off to consumers.

Any last thoughts you would like to add?

Black: Inflation is inevitably going to get worse before it gets better. You can analyze a market and forecast all day, but what you cannot do is control what the government is going to implement. If a government continues to spend money, the problem is compounded. Inflation is not a mysterious economic concept.

To learn more about Almonty Industries, visit