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Chip Supply Deficit Expected this Year, Warns Renesas

Renesas Electronics’ CEO has warned about the chip supply deficit for the first half of this year, as the computing and auto making sectors continue to face production problems.

Renesas
Hidetoshi Shibata, CEO of Renesas

Demand is expected to be strong in the first half of 2021,” CEO of Renesas, Hidetoshi Shibata said in an online earnings call. “April to June will be stronger than January to March,” he said.

The challenge for chipmakers like Renesas is that it is difficult to expand capacity at short notice. “Expanding capacity would take a very long time,” he said. “I see no prospects of output expansion producing an impact this year.”

“We don’t have any plan to change our production policy. Our policy is to outsource the production of high-end products to foundries, and only manufacture those products that we are already capable of,” Shibata said. “Our strategy is to operate as a fab-lite.”

The supply shortages are sparked by an unexpectedly strong rebound in auto demand in the second half of last year after a plunge over April to June due to the outbreak of the coronavirus pandemic.

During the second quarter, operations at many auto manufacturing plants were brought to a halt. To make up for lost output, carmakers ramped up production in the second half, resulting in a surge in demand for semiconductors, Renesas officials said.

“Demand is expected to be strong in the first half of 2021,” CEO Hidetoshi Shibata said in an online earnings call.

The chip shortages have sparked debate about whether companies that have outsourced their production should start manufacturing in their home countries.

“Our production capacity is very small. We can’t bring back the production we are outsourcing,” Shibata said.

The tight supply situation is likely to lead chipmakers to keep more inventories of semiconductor materials, such as wafers so that they can respond quickly to demand spikes, Shibata said.

The result compares with a loss of 6.3 billion yen in 2019, as slumping auto sales in China brought the chipmaker its first loss in five years.

Renesas sales in 2020, however, slipped 0.4% to 715.6 billion yen from a year ago, as a strong performance in the second half failed to offset the slump in automobile production in the first half.

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Aishwarya Saxena

A book geek, with creative mind, an electronics degree, and zealous for writing.Creativity is the one thing in her opinion which drove her to enter into editing field. Allured towards south Indian cuisine and culture, love to discover new cultures and their customs. Relishes in discovering new music genres.

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