"TSMC, Increase in Automotive Semiconductor Production and Supply Expansion"… Taiwan Sends Letter to Our Government

Taiwan Ministry of Economic Affairs Sends Letter to Ministry of Industry
Some Increase in Domestic Component Supply Expected via Infineon, NXP
"Serious Auto Semiconductor Supply-Demand Mismatch, Supply Shortage to Ease by Year-End" Predicted

[Sejong=Asia Economy Reporters Haeyoung Kwon and Sangdon Joo] The government recently received a letter from Taiwanese authorities stating that Taiwan's semiconductor company TSMC has started increasing production of automotive semiconductors and that supply to various countries, including South Korea, will increase. This came after the government requested the Taiwanese government to expand production in response to the automotive industry's emergency caused by the shortage of automotive semiconductors. Although the supply shortage may be partially alleviated with the cooperation of the Taiwanese government, the global mismatch in automotive semiconductor supply and demand is severe, making it difficult to resolve in the short term.

According to the automotive industry and related government departments on the 5th, the Taiwanese Ministry of Economic Affairs recently sent a letter to the Ministry of Trade, Industry and Energy stating that TSMC is increasing production of automotive semiconductors and that the volume supplied to global countries including South Korea through semiconductor companies that have placed orders for foundry production will increase.

As the global shortage of automotive semiconductors worsened, the government and domestic automotive industry jointly requested the Taiwanese government and companies to expand production.

TSMC holds the key to resolving the automotive semiconductor supply shortage. This is because it accounts for 70% of the global production volume of MCUs, which serve as the "brain" controlling automotive electronic systems. The top three comprehensive semiconductor companies in the automotive semiconductor market?Infineon, NXP, and Renesas?entrust most of their production to foundry companies like TSMC. Currently, a bottleneck is occurring because TSMC has not been able to increase automotive semiconductor production.

This is largely due to a failure in demand forecasting. The automotive industry reduced semiconductor orders last year, anticipating a sharp decline in finished vehicle demand due to COVID-19. However, contrary to expectations, new car orders surged at the end of the year, leading to a shortage of semiconductor inventory. Meanwhile, semiconductor companies focused on high-profit products such as semiconductors for smartphones, PCs, and servers, spreading the shortage of automotive semiconductors. Additionally, adverse events have compounded: Infineon and NXP halted factory operations due to a cold wave in Texas, Renesas stopped factory operations due to an earthquake in Japan, and a fire occurred at TSMC in Taiwan.

A government official said, "As TSMC increases automotive semiconductor production, Infineon, NXP, and others are expected to expand semiconductor supply to domestic automotive parts companies. Although short-term supply stabilization is difficult, we plan to continue close cooperation with the Taiwanese government to minimize damage to the domestic automotive industry."

TSMC is reportedly increasing MCU production by readjusting production lines, such as the 55-nanometer (nm, one billionth of a meter) production line used for general home appliances, into automotive semiconductor production lines. It takes at least six months to expand production lines, and some lines are currently being converted.

The government and automotive industry believe it will be difficult to ease the automotive semiconductor supply shortage in the short term. The Ministry of Trade, Industry and Energy expects supply disruptions to continue at least until the third quarter. Market forecasts are even more pessimistic, with supply expected to increase around July, relief from the shortage by the end of the year, and smooth supply and demand only after at least one to two years.

Most importantly, if the MCU inventory secured by Hyundai Mobis and other first-tier suppliers of Hyundai Motor Group is depleted starting next month, the impact on the finished vehicle industry is expected to be significant. The government expects the impact of automotive semiconductor supply instability to be reflected starting from this month's exports.

Moon Dongmin, Director of the Trade and Investment Office at the Ministry of Trade, Industry and Energy, explained, "So far, the impact of the automotive semiconductor shortage on finished vehicle exports has not been significant," but added, "Some impact due to supply disruptions is expected from April exports."

This content was produced with the assistance of AI translation services.