The recovery pace of the car production accelerated end of 2020 and one million more vehicles were produced last year than anticipated in the December 2020 tracker. As reported in October already the demand for car chips recovered very strongly from September 2020. Revenue reported by automotive chip vendors in Q4 2020 exceeded all expectations and the automotive semiconductor ended slightly better than anticipated in the last tracker.
IHS Markit already reported chip shortage in the December 2020 tracker before it became a global issue and made the headline in January 2021. Chip shortage will continue through 2021, and the capacity issue will last past 2022. While in February and March car makers were expecting to recover part of the lost volume in the second half of 2021 IHS Markit believes that this is not realistic. MCU suppliers will likely meet the demand first in Q4 2021. Capacity will be sufficient to produce additional quantities and recover lost volumes first early 2022.
What does 2021 bring for the automotive chip industry? Although the car production in 2021 will be well under the high water mark of 2017 IHS Markit expects the automotive chip market to reach a new all-time high this year. This is a result of a combination of increased semiconductor content, slower price erosion and toilet paper effect. The question is now for 2022 and 2023, will the industry burn all the excess inventory and will the automotive semiconductor recede like in 2012 after the recovery phase of the financial crisis? Or will the industry keep part of the inventory rebuild in 2021 and early 2022?