You can still fire a cannon at the headquarters of the Dutch chip manufacturer NXP. The majority of office workers are working from home because of corona and will continue to do so in the future.
However, the chip factories produce at full capacity, says Jean Schreurs, director of NXP Netherlands. His company is one of the largest suppliers to the automotive industry and has been overwhelmed by the rapidly increasing demand for electronics. NXP must pull out all the stops. Nevertheless, three quarters of the chips ordered are subject to a waiting period of at least one year.
NXP, listed on the American stock exchange, announced the results of the third quarter on Monday. Turnover grew by 26 percent compared to the same quarter in 2020 to 2.9 billion dollars (2.5 billion euros). The profit was $526 million.
NXP expects to sell about $3 billion worth of chips in the coming quarter. Half of the turnover comes from chips used in cars; for radar sensors, advanced driving assistants, battery management and communication systems. All products of which the modern car needs more and more.
The car industry is struggling with shortages of all kinds of electronics. A premium car consists of two hundred computers, which in turn contain hundreds of integrated circuits (ICs). In the complex production chain of the car industry, suppliers are scattered here and there with unfinished semi-finished products. Exchanging parts is difficult, causing production to stop.
The automotive industry now knows how important the chip sector is for
Kurt Sievers CEO NXP
It affects all car manufacturers. The German Audi is missing a record year this year, the Volkswagen subsidiary said on Tuesday. The sales figures do not lie: in October 2021, 24,240 new cars were registered in the Netherlands. That is a decrease of 23.7 percent compared to a year earlier.
The good news: NXP itself is growing again. The company currently has 140 acute vacancies in the Netherlands “across the board”. NXP, which has about 2,100 employees in the Netherlands, has a long history of divesting business units and reducing the workforce. “For the first time since we were spun off from Philips in 2006, we are significantly increasing the number of employees,” says Schreurs.
NXP makes about half of the chips in its own factories, such as in Nijmegen. The other half of the production is outsourced to specialized ‘foundries’, such as GlobalFoundries or SSMC. That is a factory in Singapore of the Taiwanese chipmaker TSMC, in which NXP has a majority share.
Building additional factories to meet the growing demand for chips is not an option for NXP. As turnover grows, the company will outsource more production to other partners, Jean Schreurs expects.
NXP CEO Kurt Sievers said in a conversation with analysts on Tuesday that he expects the deficits to be felt until 2022. NXP’s customers – car manufacturers and suppliers such as Bosch and Continental – continue to pressure NXP to get their hands on ordered chips sooner. But that doesn’t help. What automakers do do: They want to stock up to prevent new shortages. “It is a reset for the entire industry. The automotive industry now knows how important the chip sector is for their future.”
Depleted stocks
The automotive industry usually does not use the most modern chip technologies, but opts for more mature production methods. According to Sievers, the automakers have been depleting their inventories since 2018, expecting to sell fewer cars. But after corona, sales quickly picked up and it turned out that more electronics were needed per car. “Certainly now that one in five cars produced has an electric or hybrid drive,” said Sievers.
The share price of NXP is currently $204. That’s double from 2016, when industry peer Qualcomm attempted to acquire NXP. That deal fell through due to Chinese opposition. Thanks to the market value of 54 billion dollars, the threshold for a renewed takeover attempt of NXP is now much higher.
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source https://pledgetimes.com/nxp-chip-shortage-is-a-reset-for-the-auto-industry/
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