With another quarter to go, NXP’s cumulative automotive revenue this year has already surpassed last year’s. The chipmaker predicts full-year sales will end up 40 percent higher.
Some car manufacturers are still forced to cut back on production because they don’t have enough chips. The shortage is expected to block the production of 7.7 million vehicles this year, according to one estimate. Some cars that do find their way to consumers are lacking features. GM, for example, removed the start-stop function to be able to continue selling cars. Porsche is reportedly putting in dummy chips that will be replaced with the real thing once they’re available.
Despite these widespread issues among car companies, they keep buying chips from NXP. The automotive division of the Eindhoven-based chipmaker reported 1.5 billion dollars in revenue in Q3 2021, up 51 percent year-on-year. With another quarter to go, total automotive revenue this year has already surpassed last year’s. NXP predicts full-year sales will be up 40 percent.
Unsurprisingly, car companies still want more. “We hear the consistent message that they want significantly more product,” said NXP CEO Kurt Sievers during the Q3 earnings call with financial analysts. They won’t get it anytime soon: the lead times for the majority of NXP’s products are above 52 weeks. With inventories at record-low levels throughout the supply chain, the skewed supply and demand situation will continue throughout 2022, Sievers said.
Current high demand isn’t just a rebound effect from last year’s panic cancellations, when fears abounded that the pandemic would sink global car sales. Three longer-term trends are driving NXP’s sales as well. First, many car manufacturers are prioritizing premium vehicles, which typically have more than twice the semiconductor content onboard compared to lower-priced cars. Secondly, the adoption of electric and hybrid electric vehicles is proceeding faster than anticipated, from 8 percent of global production in 2019 to 20 percent in 2021. The average content of xEVs is also roughly twice that of their petrol-powered equivalents. And, finally, NXP is gaining market share.
To start resolving the situation, car companies are placing non-cancelable, non-returnable orders over a year out. In turn, NXP is making long-term commitments with its manufacturing partners. The chipmaker handles its packaging and testing in-house, so it needs to scale up there too. “We’re forced to put all the investments in place to make sure that any wafer we get our hands on will also find enough capacity in-house to be tested and assembled into finished product.”
“The auto industry has realized the significance and importance of semiconductors for their future. Today, but also years out. That has led to much closer and better relationships between us and the OEMs, in terms of understanding their innovation needs but also their product supply needs in the near and mid-term.”
As a result, NXP’s ability to supply automotive chips will continue to grow next year, and probably the years after as well. The company will be providing more details on that on its Investor Day, scheduled for 11 November in New York.
Main image credit: NXP