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2024: A Year Of Inventory Reduction For Auto Chip Suppliers, Says Synaptics CEO

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The worldwide car industry, after struggling with a persistent chip shortage for a year and a half until mid-2023, is set for a smoother 2024 due to ample stocks at Tier-1 suppliers and chipmakers. However, the sector faces hurdles in the 12nm-and-larger chip segment, where no new capacity is expected, according to Synaptics CEO Michael Hurlston.

Entering 2024 with robust vehicle sales, the global automotive industry is poised to gain from an abundant supply of semiconductor chips, a stark contrast to the recent period when chip shortages hampered production and pushed manufacturers to focus on higher-margin models.

From early 2020 to mid-2021, the automotive sector delicately managed a critical chip scarcity that nearly brought it to a standstill. This period saw chipmakers treating the automotive sector as just another client, prioritizing other industries like consumer electronics, which experienced a surge in demand due to lockdowns and remote work trends. Major semiconductor producers like Taiwan’s TSMC redirected their focus to chips for personal electronic devices.

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Chips are now essential for modern connected vehicles, with each car incorporating numerous chips for various functions. As lockdowns eased and vehicle sales, especially cars, rebounded around mid-2021, the industry faced a significant demand-supply mismatch, with consumers experiencing long waits for new vehicles. The semiconductor industry, already committed to the consumer electronics sector, struggled to meet the sudden spike in demand for automotive chips.

This situation led to production delays and incomplete vehicles being shipped by major automotive component suppliers and carmakers. India’s passenger vehicle industry, for instance, took nearly two years to recover to pre-Covid levels by September 2022. The situation began improving in the latter half of 2023, with companies like Maruti Suzuki India anticipating easier chip supplies. Industry leaders acknowledged the easing of the chip shortage and prepared for upcoming demand.

Michael Hurlston, CEO of Synaptics, provides insight into the current chip market and its impact on the global automotive industry. He notes that the near-term supply constraints have ended, with the industry accumulating substantial inventory over the past two years. He expects this inventory to decrease throughout 2024. However, Hurlston highlights a capacity gap in semiconductor technology for older chips above 12nm, which are still crucial for long-term automotive applications, as no new capacity is being added for these chips.

Jeremy Bouchaud of S&P Global Mobility points out the limited capacity for producing chips in the 200nm-12nm range, with most investment going towards advanced chip technologies. Hurlston warns that while 2024 will see improved chip supplies, shortages may reemerge by mid-2025. He also emphasizes the automotive industry’s reliance on mature chip nodes due to cost sensitivity and design complexities associated with advanced nodes.

As the automotive industry progresses into 2024, it can expect relief from the chip shortages that previously hindered production, allowing for the manufacture of increasingly connected and electrified vehicles that demand high processing power.

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Aryaman Raghuvanshi
Aryaman Raghuvanshi
Aryaman Raghuvanshi is a Journalist at EFY. His passion is to explore the future of mobility, which gets him to cover latest technologies shaping the future of automobiles and EVs. But, at times he writes on broader technologies too. LinkedIn: https://www.linkedin.com/in/aryaman-raghuvanshi-2431b7153
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