Chip crisis: Electric cars increase the demand for semiconductors

“The semiconductor will be the new battery cell,” says Markus Hackmann. That became clear four years ago, explains the managing director of the P3 Group. Automakers that had prepared for the problem would now be better able to cope with the challenge. In an analysis by the consulting firm P3, the authors describe the causes and effects of the current semiconductor crisis: The car industry has made itself dependent on Asian producers – similar to what happened before with battery cells. The supply chains are disrupted and electric cars are particularly affected.

Battery-electric cars have twice as many semiconductors as cars with a combustion engine: the ratio is around 1300 to 600, argues P3. The concentration takes place in the drive train and there in the inverter: around 600 semiconductors are installed here, while there are 300 in a combustion engine.



With 1,300 units, battery-electric cars need around twice as many semiconductors as cars with combustion engines. The chips are concentrated in the inverter.

In a rather simple car from 2017 with an internal combustion engine, the semiconductors accounted for about two percent of the total costs. In a battery-electric car by 2030, it will be six percent, i.e. three times as much. For electrification, they are required for the charger, central computer, DC/DC converter, high-voltage battery, inverter and electric motor itself. Further development drivers are driving automation and infotainment. Autonomous driving requires several cameras, radar systems and sensors by levels 4 and 5 at the latest. In the future, braking and steering will work by wire. The infotainment and connectivity units have more semiconductors than a radio. A lot of chips that will be needed in the future.



By 2030, the number of semiconductors in (electric) cars will continue to increase. They are needed for driving automation, but also for the electrification components and infotainment.

Referred to as “repeat failure like battery cell”. the P3 Group the dependence on Asian manufacturers both for the product itself and for plant construction. Like the battery cell, the importance of semiconductors was underestimated; the auto industry has demoted them to an arbitrary part of a supplier.

However, the market power of the automotive industry is comparatively low when it comes to semiconductors: only eight percent are purchased here, while consumer electronics such as smartphones and PCs account for 80 percent. The trigger for the current situation, which is almost catastrophic for some manufacturers, is the Covid pandemic: Many orders were canceled in 2020 for fear of a slump in demand. But there was only one dent, the market picked up again. At the same time, however, the demand for chips for consumer electronics skyrocketed because, for example, tablets and notebooks were needed for remote learning worldwide.



The trigger for the semiconductor crisis was the Covid pandemic. That still applies now. There is a traffic jam in the Asian ports.

The change from new Covid infections, temporary lockdowns and the subsequent boom has led to stagnation to this day. For example, the traffic jam in front of the port of Shanghai – the largest in the world – hasn’t even remotely resolved. The container ships travel at high speed because the costs can be passed on to the final prices. Extreme prices are demanded and paid for semiconductors. In Europe, on the other hand, the next traffic jam forms because the seaports in Rotterdam, Antwerp and Hamburg are already working on the stop.



The auto industry has made itself dependent on suppliers from Asia. The P3 Group, from which this analysis comes, calls this a “repeat error as with the battery cell”.

It can currently take up to 72 weeks from order for semiconductors to arrive. A precarious situation that leads to the well-known distortions: it is practically impossible to get the basic models of battery-electric cars like the VW ID.3. Because of the shortage, the manufacturers – and this also applies to passenger cars with combustion engines – are concentrating on selling high-margin models.



Low market power: Cars account for only eight percent of global semiconductor production. The bulk goes into consumer electronics.

This only works because demand and purchasing power remain strong. But it doesn’t have to stay that way: In the price-sensitive segments there are potential customers who cannot be served at all at the moment. In the worst case, Chinese brands will eventually make attractive offers in the compact class and small cars.

After all, it is becoming apparent that Bosch will be able to produce more semiconductors at the Dresden plant from 2023. Intel invests 17 billion euros in Magdeburg. Intel is not an original automotive supplier; the spatial proximity to Wolfsburg and elsewhere will result in that. However, large-scale production is not expected until 2027.



Compared to a conventional car from 2017, the share of semiconductors in the total costs of an electric car in 2030 will triple from two to six percent.

“In the acute situation, we at the P3 Group are creating transparency about the supply chains,” says Mauritz Schwartz, a specialist in semiconductors. Many people involved in the car industry are not clear, for example, who is actually the producer and who is the middleman. Out of this analysis improvements and more precise delivery forecasts could be made.

The emergency is the result of miscalculations plus the Covid pandemic. The answer to this must be at least a partial regionalization of production. This is the only way to reduce the excessive dependence on semiconductors from Asia. In this way, supply chains also become traceable and faults can be rectified more easily. It is unclear how long the semiconductor crisis will continue. At some point it broke up – and hopefully the consequences will then have been drawn. However, if semiconductors and battery cells continue to come mainly from Asia, this poses a threat to Europe as a location and consequently to German industry.



Creating transparency in the supply chains is one of several measures to be able to cope with the acute situation. In the future, hopefully new regional production plants like Intel’s in Magdeburg will provide some relief.


(mfz)

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