Sources from Japan’s auto industry has indicated that the chip shortage crisis has shown signs of relief, attributing it to the Chinese government’s latest efforts to tackle the chip hoarding practices widespread among its technology industry.
As TSMC chairman, Mark Liu, indicated in his recent interview with the Time magazine, the ongoing chip crisis could be partially attributed to chip hoarding, as firms feared to be engulfed in the Sino-American trade war. The TSMC chairman was certain that people were accumulating chips somewhere along the supply chain, since “more chips were being sent to factories than were leaving them in products.”
Indeed, China’s latest efforts against chip hoarding might have addressed the pain point, since the country began stockpiling chips as early as 2019, when Huawei came under U.S. sanctions and subsequently faced serious difficulties with making its own chips. Huawei itself began to stockpile chips before the sanctions took effect in September 2021. For instance, TSMC reportedly received a hike in Huawei’s orders to produce approximately 2 million “Tiangang” chips – Huawei’s chips for 5G base stations. Facing the sudden surge of orders, TSMC officials even casted doubts on their own estimations of global demands.
As an expert from Taiwan’s Industrial Technology Research Institute pointed out, the tension and uncertainty around Huawei sanctions had also prompted many Chinese electronics suppliers to stockpile chips as a precautionary measure. The recent U.S. demand for chipmakers, among them TSMC, to provide confidential information regarding their supply chains might also be an attempt to identify China’s hoarding practices. Unprecedentedly, China imported US$32 billion of chip manufacturing equipment from countries like Taiwan, Japan, and South Korea in 2020 – a 20% jump from 2019.
Apart from precautionary measures, some malpractices among Chinese chip distributors further exacerbated the shortage crisis, as they stockpiled and maliciously inflated chip prices. For example, certain microcontroller units (MCUs) have seen their prices soaring from US$6 per unit to US$50 within one year. In other sectors, automakers have complained about chips soaring to 20 times of their original prices.
In response, China’s State Administration for Market Regulation has begun to probe chip hoarding and other speculative practices, starting in August 2021, and in September it has fined three chip distributors for inflating automotive chip prices by 40 times. Even though the shortage crisis still persists, Japanese automakers claimed that the situation had been alleviated.