Demand for chips will present divergent trends in 2022, as automotive chips will remain in short supply and consumer electronics makers are reportedly scaling down their chip demand, according to industry sources.

There was speculation that the auto industry could see chip supply improvements as a result of dropping demand in the consumer electronics sector, but the sources noted that car-grade chips cannot be replaced by ones used in consumer electronic devices.

Over the past year, auto and consumer electronics makers have often struggled for chip supplies. Automakers had been too conservative in their forecasts about economic recovery, prompting chip suppliers to switch parts of their production capacity to support consumer electronics and industrial applications. When automakers later tried to get back their support, consumer electronics makers would not give in, the sources said.

However, the situation in 2022 will be different, they said. Chip suppliers have hiked prices and required advance payments from clients with long-term contracts, and the auto industry has almost entirely restored their previous chip support, they said.

Nonetheless, even if automakers managed to restore all the car-chip production capacity around the world, car chip shortage will remain, the sources said.

Vehicle electrification has driven up the need for chips, as an electric vehicle (EV) needs 200 more chips than a traditional fossil fuel car, they said.

The increasing popularity of advanced driver assistance systems (ADASs) and SAE Level 2 driving automation in vehicles shows that the auto industry's demand for chips will continue to rise, they added.

Basically, demand for automotive chips is growing faster than automakers estimated, but suppliers are unable to catch up at the moment. Therefore, automotive chips are expected to remain in short supply in 2022 despite bleak factors such as inflation, the Russian-Ukraine war, and other geopolitical risks, they said.

Mainstream automakers have claimed almost all foundry capacity available for automotive chips. Auto startups who need car-grade chips, such as some US startups and China's Nio, have to spare no effort to secure chips even if they are not as powerful as big automakers, the sources said.

Nonetheless, quite a number of auto startups tend to follow their own standards, so they accept commercial-grade chips. In the second half of 2021, several startups obtained additional market shares by virtue of their flexible design, test, and validation procedures.

By DIGITIMES