New probe expected to rein in price gouging amid persistent shortages

 

The Chinese government is taking solid steps to ensure the prices and supplies of auto chips remain stable amid a global shortage of semiconductors that has been hurting the world's automakers, including those in China, the most, industry experts said on Monday.

 

They also said auto chip shortages became evident amid the COVID-19 pandemic. They said they believed the impact of chip shortages on car production will continue this year, and called for intensified efforts to crack down on hoarding of, and speculative activities in, auto chips.

 

Auto chip prices have risen tenfold to twentyfold compared to the first half of 2020, according to a news report by China Media Group on Friday.

 

The report noted the recent rally in auto chip prices was mainly driven by hoarding and speculation in the market.

 

Shortage of chips ought not to result in speculative activities in the chips market; the authorities concerned will be committed to cracking down on market violations and maintaining market order, the report said.

 

On Aug 3, China's top market watchdog announced the launch of an investigation into auto chip dealers over suspicions of price gouging.

 

China's State Administration for Market Regulation said it will enhance market scrutiny and crack down on illegal practices such as hoarding, price gouging and collusion.

 

Xiang Ligang, director-general of the Information Consumption Alliance, said hoarding and speculation have caused the auto chip prices to rally, and the government's investigation to crack down on illegal activities will help ease chip shortage.

 

Xiang said the surge in auto chip prices could tempt manufacturers to significantly increase chip supplies. He warned any such opportunistic moves could lead to a situation where shortages may be followed by overcapacity.

 

Zhou Xibing, a veteran technology analyst, said shortage of auto chips may persist for a long time amid mounting uncertainties.

 

"The government's investigation launched on Aug 3 may help stabilize the chip prices, but it will not fundamentally solve the chip shortage," Zhou said.

 

"The government needs to make a big push to encourage the private sector's participation in the building of chip industry chain, provide policies, talent and land in support of private enterprises in the chip sector, crack down on hoarding and other illegal practices in the market, and encourage private enterprises to acquire global companies in chip-related sectors.

 

"More efforts should also be made to encourage overseas chip companies to develop products in China and provide them with supportive policies."

 

The Ministry of Industry and Information Technology, the nation's industry regulator, has asked local automobile makers and semiconductor companies to compile a brochure on auto chips, to match supply and demand better.

 

The ministry is also encouraging insurance companies to roll out insurance services that can boost local automakers' confidence in using indigenously produced chips, so as to help ease chip shortages.

 

Four Chinese chip design companies inked agreements with three local insurance companies in June to pilot such insurance services.

 

Dong Yang, co-chairman of the China Automotive Chip Industry Innovation Strategic Alliance, an organization founded in September 2020 to promote the development of China's homegrown auto semiconductor sector, said China now has capabilities to overcome the problem of insufficient domestic production of auto chips.

 

"Auto chips do not require the highest-end manufacturing technology. For instance, most car chips are made with 28 to 40 nanometer manufacturing process, which Chinese chipmakers are capable of. There is no high threshold for the design capabilities, production conditions and manufacturing equipment of chips," Dong said.

 

"The main difficulty lies in the high requirements for reliability, durability for bad weather, consistency and functional safety. China only lacks an ecosystem for the design, production and application of automotive chips. This is where we must excel in."