By Greg Gao

(JW Insights) Mar 28 -- Many automakers in China have resorted to sharp price reductions to stimulate demand recently, which are affecting the automotive chip suppliers, according to recent Chinese language reports.

BMW, Geely, and BYD reportedly cut automotive IC orders and required suppliers to reduce prices in response to sluggish market demand, casting clouds over the shipment prospects for automotive chips suppliers.

Just several months ago, there were still the shortages for power management IC, MOSFET, micro-controller (MCU), and other auto chips, but now China’s auto manufacturers no longer demand them much.

Affected suppliers include Silergy Corp(矽力杰), Foxconn Technology-backed GMI Technology(富鼎) and Nuvoton(新唐) under Walsin Lihwa Group(华新丽华集团).

Additionally, Geely’s sharp cut in orders for head-up displays (HUD) may also hurt chip vendors in the Taiwan region like Princeton Technology(普诚), E-Lead Electronic(怡利电子), and others in the related supply chains.

About 100 models of over 40 auto brands in China have cut prices to reduce their inventory level. As the price war rages on, auto manufacturers’ cutting orders and bargaining prices from suppliers have become more intense.

From March 1-12 this year, the sale of passenger cars in the Chinese market was 414,000 units, down 17% year-on-year and 11% from the same period last month. Cumulative retail sales so far this year have reached 3.094 million units, down 19% year-on-year, according to the statistics of China Passenger Car Association( CPCA).

CPCA pointed out that although the car market gradually rebounded after the Spring Festival as a result of regional stimulus policies, consumers’ confidence was boosted significantly. However, from the figures of the first two weeks of March, the conversion rate was not high, the consumers were still hesitant and in a wait-and-see mood.

The latest survey by Morgan Stanley also showed that major automotive brands began to cut orders, generating pressure to automotive semiconductor suppliers. Automotive semiconductors, components, batteries, and aluminum parts are beginning to face downward price revisions. The automotive semiconductor supply chain may face a crisis that has not appeared in the past two or three years. Only IGBT could be an exception and maintain its boom.

Leading Chinese automaker BYD reportedly is enforcing production cuts in response to sluggish China market demand, impacting Taiwanese suppliers of automotive chips, reported DIGITIMES Asia.

There has been a global shortage of chips in the past two years. The supply of automotive MOSFETs has been in short supply in the past 18 months. Now the supply of automotive MOSFETs is no longer tight.

Chen Wei, the chairman of Silergy Corp, said recently that the company’s performance in the first half of this year might not be as good as the same period last year. According to the status of its customers, the inventory adjustment is expected to end in the first half of the year. It is still uncertain when the demand will pick up, depending on overall global economic factors.