Articles


2022-05-17

China’s Lockdowns Erode Car Production and Sales, May Reduce Global Car Sales by 80 million units in 2022

Due to the implementation of lockdowns and dynamic zero-COVID in Shanghai and other locations in China, a large number of automotive supply chain manufacturers have been idle since March and the implementation of passive measures in many locales has led to a decline in both production and sales. A large number of automotive companies are clustered in Shanghai and it is the hub of the entire Chinese automotive industry. Many foreign automotive companies, Tier 1 suppliers, important parts and components headquarters, production bases, and distribution centers are located here, such as Tesla’s Shanghai plant.

This also includes an important state-owned automotive company, SAIC Motor and all its subsidiary automotive factories and wide network of suppliers. The total production capacity of Shanghai and Jilin accounts for approximately 20% of the whole of China. The production volume of major automakers in Shanghai in April 2022 will drop by 75% compared with March, while the production volume of major joint venture automakers in Changchun (Jilin Province) will drop by 54%. The drops in these two regions were sharper than the 38% decline in China as a whole. Recently, several districts in Beijing have been locked down. The impact of this on sales depends on the duration of lockdown. BAIC Motor, Beijing Benz, and Beijing Hyundai are located in Beijing and these companies will bear the brunt of these lockdowns if they are required to suspend operations.

Further discussing the three major effects of this wave of lockdowns, first, the lockdowns will disrupt the pace of new car launches in spring. Second, the export plans of automotive companies will be impeded, which will slow the expansion of Chinese car companies into overseas markets. Third, there is a risk of stagnant demand. The stagnation of demand can be viewed from several perspectives.

First, is the closure of traditional distribution channel car dealerships due to the decrease in orders. According to China Automobile Dealers Association statistics, more than 20% of automobile dealers in China have closed down, which hinders the car purchase process. In addition, since automobile pricing continues to rise due to a number of environmental factors, if delivery is continuously delayed or the acceptance of car orders is suspended, there is a risk of consumption shrinking as time goes on. Third, the negative impact of lockdowns on economic activities, employment, and salary income, coupled with global inflation, will bring uncertainty to demand in China’s automotive market in the second half of 2022.

The global auto market is experiencing a very unstable period. The lingering impact of the COVID-19 pandemic, the persisting shortage of semiconductor chips, and the Ukrainian-Russian war has caused chaos in the supply chain in Europe and other regions and it seems the war will last longer than expected. Many automotive plants are still unable to operate smoothly.  Facing sustained production reduction or the transfer of production capacity, coupled with China’s lockdown and zero-COVID policies which began in March, global car sales in 1Q22 amounted to only 19.6 million units, down 7% from the same period in 2021.

Although the auto industry accounts for the majority of the work resumption whitelist announced by Shanghai in April, restoring production capacity is expected to take some time as manpower and transportation capacity are still limited and sales may still decline or remain low. Therefore, after taking into account the regional consideration of the Chinese market in 2Q22, sales volume is expected to be 17.7 million units and annual sales volume is revised downward to 80 million units, an annual decline of 1.3%. This forecast is based on the assumption of a supply turnaround leading to rebounding sales in the second half of 2022, so changes in various environmental factors will strongly affect the revision of future expectations.

(Image credit: Pixabay)

2022-05-16

Bucking Trends NEV Market Grew in 1Q22 with Global Sales Exceeding 2 Million Units, Says TrendForce

According to TrendForce data, total sales of new energy vehicles (NEVs including battery electric vehicles, plug-in hybrid electric vehicles, and fuel cell vehicles) in 1Q22 was 2.004 million units, an annual growth rate of 80%. Battery electric vehicles (BEV) demonstrated the strongest growth with sales reaching 1.508 million units. Plug-in hybrid electric vehicles (PHEVs) sold 493,000 units. Growth in NEV sales did not come easy, as global auto market sales (regardless of powertrain type) fell by 7% YoY in 1Q22 due to factors such as the chip shortage, Russian-Ukrainian war, and China’s pandemic lockdown and prevention measures.

In terms of BEV brands, Tesla’s sales in 1Q22 exceeded 310,000 units, ranking first with a market share of 20.5%. Chinese automaker BYD ranked second with 143,000 units and a market share of 9.5%. BYD announced in April that it would stop producing fossil-fueled vehicles and transform fully into a NEV manufacturer. Its BEV sales rose sharply by 271% in 1Q22 compared to the same period last year. Wuling, a subsidiary of SAIC-GM, has been ranked second since the launch of the Wuling Hongguang MINI in 2020 but dropped to third place in 1Q22. The main contributor to this was the multitude of models positioned as miniature and low-priced launched in the past year such as the Chery Ant and Changan Benben. As similar products arrived on the market, sales competition hindered growth.

In terms of PHEVs, BYD once again broke its quarterly sales record. Sales volume in 1Q22 reached 142,000 units, with a market share of 28.8%. As more PHEV models gradually appear in the market, it has become increasingly more difficult to capture a large market share. It is worth noting that the sales volume of PHEVs in the European market was lower in 1Q22 both when compared with the same period last year and when compared to 4Q21, affected the performance of some European brands.

TrendForce expects that most automakers will adopt a strategy of prioritizing the production of EVs. Therefore, continued growth in the sale of NEVs is expected in 2022. However, automakers will be under greater cost pressure this year. In particular, the Russian-Ukrainian war has greatly increased the cost of power batteries. This has caused automakers to increase their prices. Some countries including China will withdraw car purchase subsidies which dampens the market for low-priced mini-cars that previously supported the rapid growth of NEVs. Factors such as global inflation will become variables in the future growth momentum of NEVs.

2022-05-11

Lingering Pandemic Vexes Economic Performance, 2022 Smartphone Production Volume Reduced to 1.333 Billion Units, Says TrendForce

According to TrendForce research, global smartphone production volume in 1Q22 was 310 million units, a QoQ decrease of 12.8%, primarily attributed to ongoing inventory adjustments in various distribution channels performed by a number of brands and the cyclical off-season, which led to relatively weak production performance in 1Q22. In 2Q22, a resurgence of the pandemic in the world’s largest consumer market, China, exacerbated the drop in global 2Q22 mobile phone production to 309 million units. However, compared to the same period in 2021, when a resurgent pandemic in India and Southeast Asia caused a sharp drop in total production, mobile phone production grew slightly by 0.7%.

TrendForce further indicates that the war between Russia and Ukraine continues to exacerbate the rising global inflation issue. High inflation means that personal disposable income will shrink and will inevitably lead to prolonged replacement cycles and reduced purchasing budgets for individual devices. Summarizing 2022, corrections in 1H22 were primarily due to the impact of China’s lockdowns on the economy while corrections in 2H22 highlight the inflation crisis. The total production forecast for the entire year will be revised down to 1.333 billion units and there is still room for downward revisions in the future.

Due to China’s economic headwinds, shipments fall again to 283 million, an annual decline of nearly 13%

From a regional perspective, due to China’s insistence on maintaining a strict “dynamic zero-COVID” policy and the recent festering of the pandemic, economic performance is also facing greater downward pressure and the demand for smartphones has likewise cooled in the face of pandemic prevention measures. Overall, the sales market share of China’s smartphone market still ranks first in the world but, due to the impact of the pandemic, its market share has dropped from 24.2% last year to 21.1% this year while the corresponding total shipment forecast fell from 325 million units last year to 283 million units, an annual decline of approximately 12.9%. Although the impact of the pandemic in the remainder of the region has been comparatively blunted, in the face of a rising inflation crisis, even the overpopulated Indian market will be unable to support substantial growth. From the perspective of the 2022 national shipment share ranking forecast, the top three positions will be held by China, India, and the United States, accounting for a 21.1%, 13.1%, and 11.0% share, respectively.

2022-05-11

Third-generation Semiconductor Development from the Perspective of Photovoltaic Energy Storage Applications

With the continuous deterioration of the global environment and the exhaustion of fossil fuel energy, countries around the world are looking for new energy sources suitable for human survival and development. The construction of photovoltaic energy storage projects is an important measure to implement energy transformation. Third-generation semiconductors have the characteristics of high frequency, high power, high voltage resistance, high temperature resistance, and radiation resistance, which can promote highly efficient, highly reliably, and low cost of photovoltaic energy storage inverters and the green and low-carbon development of energy.

SiC will be widely used in high-power string/central inverters, while GaN is more suitable for household micro-inverters

As the photovoltaic industry enters the era of “large components, large inverters, large-span brackets, and large strings,” the voltage level of photovoltaic power plants has increased from 1000V to over 1500V and high-voltage SiC power components will be used extensively in string and centralized inverters. For residential micro-inverters with a power of up to 5kW, GaN power components have more advantages. Not only can they significantly improve overall conversion efficiency, effectively reduce the levelized cost of energy (LCOE), but also allow users to easily build smaller, lighter, and more reliable inverters.

Key SiC substrates are crucial to the development of third-generation semiconductors and major manufacturers are competing to get to market

SiC substrate is regarded as the core raw material of third-generation semiconductors. Its crystal growth is slow and process technology complex. Mass production is not easy. Conductive substrates can produce SiC power electronic components while semi-insulating substrates can be used for the fabrication of GaN microwave radio frequency components. In addition, due to the high difficulty of substrate preparation, its value is relatively high. The cost of SiC substrate accounts for approximately 50% of the total cost of components which demonstrates its importance in the industrial chain.

At present, the supply of the global SiC market is firmly in the hands of substrate manufacturers. Wolfspeed, II-VI and SiCrystal (subsidiary of ROHM) together account for nearly 90% of shipments. IDM manufacturers such as Infineon, STM, and Onsemi are actively developing upstream SiC substrates and expect to take full advantage of the supply chain to strengthen their competitiveness. Everyone wants to get a piece of the pie, so the battle for SiC substrates will become more and more fierce, but the wait will not be long to see where the industry eventually goes in coming years.

(Image credit: Pixabay )

2022-05-10

Metaverse Market Size US$47.5 Billion in 2022, 18.7% Annual Growth Rate

According to TrendForce research, the global Metaverse market reached US$38.6 billion in 2021, an increase of 17.9% compared to 2020. The global Metaverse market is expected to reach US$47.5 billion in 2022, with a growth rate of 18.7% and a CAGR (Compound Annual Growth Rate) from 2022 to 2030 of 39.4%. With the rapid expansion of the digital economy to the Metaverse and its total addressable market (TAM), total revenue of the global digital economy will account for 22.3% of total global GDP in 2028. Initial estimates reveal that the potential market opportunity of the Metaverse is approximately US$3.8 to US$12.5 trillion.

Due to the vague concept and definition of the Metaverse, specific actions and orientations are mainly based on games and NFTs (Non-Fungible Token, non-fungible tokens). Potential areas of development and feasible markets are also relatively vague, forcing companies into a mostly wait and see stance. In the second half of 2021, countries successively introduced relevant policies for the Metaverse, solidifying a clear development vision, and attracting the participation and speedy investment of Acer, HTC, Microsoft, Tencent, Take-Two, and Lenovo. At present, Adidas, Atari, Ferrari, Gap, Hulu, Nike, Verizon, and Walmart are entering the virtual world in different ways to witness the immersive experience of the digital universe.

Since the Metaverse’s digital asset transaction and exchange program involves three inseparable structures of legal currency, cryptocurrency, and NFTs, it also reeks of issues on many levels including ownership and intellectual property rights, digital asset transfer pricing, system encryption, supervision mechanisms, money laundering prevention, and combating terrorism, resulting in different degrees of openness to the Metaverse in different countries. Take the United States and China as examples.

The U.S. Treasury Department released the “Study of the Facilitation of Money Laundering and Terror Finance Through the Trade in Works of Art” in February 2022. The report pointed out that, due to limited evidence of money laundering, the government temporarily refrained from taking immediate intervention measures against the self-regulating global art industry (including digital assets). However, if the current situation persists, there will be lurking future risks to the US economy and national security, such as an increase in the risk of entities using the soaring value of the digital art market to bypassing global legal norms. Whether or not to intervene will need to be discussed further.

In contrast, China has adopted stricter policies, such as prohibiting the circulation of cryptocurrencies in the market and prohibiting cryptocurrency exchange. From this point of view, if China wants to develop the Metaverse, it will be limited in terms of expanding into new application fields. On the whole, the world has the same development vision in AR/VR, advanced infrastructure (including communication technology), and AI/ML. However, China’s restrictions on “cryptocurrency” and “game bans,” will pose both the greatest challenges and new market opportunities to participants in games and digital assets. Metaverse development plans proposed from various regions in China and the aforementioned legal digital currency show that the Chinese authorities already have a set of plans, development goals, and operation frameworks.

(Image credit: Pixabay)

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