The China Passenger Car Association (CPCA) said the shortage of automotive chips is due to a shortage of supply and a large increase in demand caused by the impact of the COVID-19 pandemic on the distributed global supply chain, and expects the problem to gradually ease.

The surge of COVID-19 pandemic in Europe in the fourth quarter of 2020 drove the demand for online communication, with demand for PCs and PADs jumping 26% and 54% year-on-year, so major IC manufacturing lines around the world are experiencing capacity constraints, the CPCA noted.

Automotive chip shortage is a worldwide supply problem, coupled with the high growth in demand for consumer electronics products, resulting in some impact on demand for automotive chips, the CPCA said, adding that many international car companies are also affected by the chip and resulting increased pressure on car supply.

In addition, the consumption pattern of consumer electronics like cell phone and home cars are different, with the peak season for cell phone sales is May-November and the off-season for February-April. With the end of Christmas in Europe and the United States, chip production resumed.

At the same time, China's Spring Festival is approaching, most students in Europe and the United States resuming classes online, the peak demand for consumer electronics products has passed. So the chip shortage problem should be significantly alleviated, the CPCA said.

The pandemic is well controlled in Asia, and the situation in Europe and North America is also improving, with more pressure in the southern hemisphere. Therefore, from the perspective of supply of chips, with the gradual improvement of the pandemic, a rebound in production capacity is expected, the CPCA said.

Due to the end of the peak production season of consumer electronics products, the future conflict of supply and demand of chips is expected to be significantly reduced.

Under the circumstances of chip shortage,  the production of Chinese new energy vehicles that have high demands for chips in January surged 280% year-on-year, while production of independent brand rose 69% year-on-year. This also shows that the international traditional automotive industry chain has problems and needs to be reformed, the CPCA said.

Tight chip supply could affect stability of China's auto industry, association warns

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