Chinese Automakers' Price Cuts Send Shockwaves Through Automotive Chip Industry

According to a report from the Economic Daily, Chinese automakers' price cuts to boost sales are affecting the automotive chip industry. Benchmark car manufacturers such as BMW and Geely have recently slashed orders for popular chips such as power management ICs, MOSFETs, and microcontrollers (MCUs) and demanded lower prices from suppliers, which has impacted companies like Silergy, Hon Hai, which turned to investment in Fudan Microelectronics and Hua Xia Li Hua's New Tang for new orders.

In addition, Geely has significantly reduced orders for Head-Up Display (HUD), which could hinder the shipping capacity of related supply chains such as Pucheng and Yili Electric.

Currently, more than 40 domestic car brands and around 100 models have launched price promotions, intensifying the trend of cutting orders and bargaining with suppliers in the supply chain.

However, according to the latest statistics released by the China Association of Automobile Manufacturers (CAAM) on March 15, while the price cuts have attracted consumers to inquire about purchases, they have also caused them to adopt a wait-and-see attitude. From March 1 to 12 this year, the retail sales of passenger cars in China reached 414,000 units, a year-on-year decrease of 17%, and an 11% decrease compared to the same period last month. The weekly retail sales volume of passenger cars has also decreased compared to the same period last year and last month. The cumulative retail sales volume this year has reached 3.094 million units, a year-on-year decrease of 19%.

According to the latest survey from Morgan Stanley, major car brands have begun to cut orders, resulting in semiconductor suppliers facing price pressure. On the other hand, automotive semiconductors, automotive parts, batteries, aluminum parts, and other related fields are also facing price reductions.

Suppliers have recently pointed out that leading automotive chip manufacturer, ON Semiconductor, is reviewing whether it has customers repeating orders.

Overall, the trend of "Tech Deflation" in recent years has helped boost demand. However, for automotive semiconductor companies, profit margins may be compressed. Currently, suppliers of automotive power management ICs are already facing price pressure. Among all types of automotive electronic components, only Insulated Gate Bipolar Transistor (IGBT) remains in demand. As an electronic components distributor, it is important to keep an eye on these industry trends and respond accordingly.