Car Semiconductor Inventory Recovers to Pre-COVID-19 Levels...Will Automakers Breathe Easier?

Global 4 Companies, Inventory Turnover 3.48 Months
Time Needed Until Complete Normalization of Automaker Production Systems

[Asia Economy Reporter Lee Ji-eun] Inventory levels of global automotive semiconductor manufacturers have returned to pre-COVID-19 levels. This recovery is attributed to the resumption of production at factories that had halted operations due to the spread of the Omicron variant and factory fires. However, it is expected to take time for automakers' production systems to fully normalize.

On the 6th, the Nihon Keizai Shimbun reported that the average inventory turnover period for four companies?NXP of the Netherlands, Infineon of Germany, Renesas Electronics of Japan, and STMicroelectronics of Switzerland?was 3.48 months for April to June this year. This figure is similar to the annual average of 3.51 months in 2019, before the COVID-19 outbreak. The inventory turnover period measures how many months it takes for a company to sell its inventory.

Earlier, during April to June 2020, when the COVID-19 pandemic intensified, automotive semiconductor inventory increased significantly to 3.9 months. This was because automakers expected a sharp decline in vehicle sales and reduced their parts orders, leading to increased inventory. However, contrary to expectations, vehicle demand began to recover from the end of 2020, accelerating the semiconductor supply shortage. The inventory turnover rate decreased to 2.85 months in January to March 2021.

Furthermore, the supply shortage worsened due to a fire at Renesas Electronics' manufacturing plant in Japan last year and lockdowns in China and Southeast Asia, where production plants are located, caused by the spread of the Omicron variant.

The inventory levels of the four companies, which had been slow to increase, have been recovering since the third quarter of last year. Jochen Hanebeck, CEO of German semiconductor manufacturer Infineon, explained, "The supply of microcontroller semiconductors that control vehicle driving and the essential core component known as the 'golden screw' for product completion is expected to gradually increase."

Arno Antlitz, CFO of German automaker Volkswagen, also forecasted, "The semiconductor supply shortage is expected to ease from the second half of the year (July to December)."

However, Nihon Keizai Shimbun anticipates that it will take time for automakers' production systems to return to pre-COVID-19 levels. This is due to various factors restricting production recovery, such as rising raw material prices and parts supply issues caused by supply chain disruptions. Honda Motor of Japan also announced plans to reduce vehicle production by 40% in early September due to parts supply shortages.

In response, semiconductor manufacturers are concerned that semiconductor supply may exceed the recovery level of automaker production, leading to increased inventory. Hideto Sabada, President of Renesas Electronics, told Nihon Keizai Shimbun, "Due to rising raw material prices, some items require payments more than ten times higher. If semiconductors are excessively oversupplied, trading conditions could become unfavorable, so it is challenging to control both raw material and inventory costs simultaneously."

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