Double blow of cost pressure and semiconductor supply shortages shaking the future car ecosystem

*This content was translated by AI.

Recently, the global automotive industry has faced a massive structural challenge: rising raw material prices and a shortage of vehicle semiconductors. Automakers are experiencing a double squeeze (Double Squeeze) from both sides: they must lower final delivery prices due to intensifying price competition in the market, while their profitability is rapidly deteriorating due to sharp price hikes in upstream supply chains.

The fallout from cost pressure is clearly reflected in the declining performance of major automakers. This trend has become particularly pronounced in China, the world's largest market for eco-friendly vehicles. While retail sales of passenger cars in China dropped by more than 20% year-on-year in the first half of the year, Changan Automobile's net profit plummeted by approximately 60%, while GAC Group and Seres recorded losses or turned into losses amounting to billions of yuan.

These companies unanimously cited rising prices for raw materials and parts as the core factor behind their deteriorating performance. In addition to battery materials such as lithium, a decisive blow came from the explosive demand for AI data centers, which caused sharp price increases in memory semiconductors based on mature processes mounted in vehicle infotainment systems and advanced driver assistance systems (ADAS). For some high-end models, it was found that the material cost per vehicle rose by up to 10,000 yuan (approximately 1.9 million won).

This supply chain instability and advancement of IT technology are leading to a semiconductor acquisition war in the automotive industry. As vehicles have essentially evolved into "computers on wheels," the demand for semiconductors has surged from just 200 to 300 per internal combustion engine vehicle to over 1,000 for electric vehicles and more than 2,000 for level 3 or higher autonomous driving vehicles. With the full-scale shift toward autonomous driving and software-defined vehicles (SDV), data processing space is expanding, and demand for vehicle memory semiconductors is expected to grow rapidly by an average of over 11% annually.

Accordingly, global automakers are abandoning their existing short-term procurement methods and betting everything on building long-term supply chains. General Motors (GM) and Ford in the U.S. have recently signed multi-year long-term supply agreements for vehicle memory semiconductors with U.S. semiconductor company Micron, moving to secure volume ahead of competitors. In China, NIO and XPeng are taking it a step further by accelerating their semiconductor localization strategies, such as developing system-on-chips (SoC) for autonomous driving themselves and applying them to Yangsan vehicles. Analysis suggests that these IT technological capabilities and supply chain control powers lie behind Tesla's dominance in the domestic imported car market and the strong performance of Chinese companies.

In an environment of infinite competition where demand slowdown and rising costs overlap, the survival of automakers depends on securing key components stably and controlling costs. Only companies that achieve economies of scale through parts commonality and proactively diversify supply chain risks will be able to seize the initiative in the future car market.

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*This content was translated by AI.