The semiconductor industry and the auto industry are getting closer
The trend is clear: there are more and more chips in cars. Their shortage threatens the German model industry accordingly. What to expect in the coming months and how investors can react to this development.
The chips are running out. In the automotive industry in particular, the production lines were sometimes at a standstill because the urgently needed semiconductors were not delivered. But necessity makes you inventive. This means: car companies are already taking countermeasures – and bypassing their previous suppliers, such as Continental. Instead, they enter into agreements with chip manufacturers directly. One example is the deal between Renault and ST Microelectronics. In the future, the chip manufacturer will produce its own chips for the French car manufacturer – including advantages such as longer running times with one battery charge or faster charging times. The business could also point the way for German carmakers and companies such as Infineon.
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Resourceful automakers could outperform the competition
Why? The shortage of chips is so blatant that the auto industry could not be a stimulating element for the German economy even in the second half of the year. In June, German carmakers were already producing 13 percent fewer cars than in the previous month, seasonally adjusted. In May it was around 20 percent less than before. These numbers don’t bode well for the auto industry. But the agreement between Renault and ST Microelectronics could be an example of a solution.
In the past few months, German carmakers have proven that they can react flexibly and proactively to problems – VW’s e-car offensive caused a sensation in the industry and also stimulated the stock’s rather subdued development. It is quite possible that behind the scenes work is already underway on new business between car manufacturers and the chip industry. On the one hand, the beneficiaries of this business would be the chip manufacturers who could sell directly to the automotive industry without intermediaries. It is possible that the input from the car companies will even lead to innovations. On the other hand, the car manufacturers are likely to be among the winners. The market is currently not pricing in any significant growth in sales figures. However, if the chip problem is resolved and production picks up speed again, the general upswing in the German economy could also reach car manufacturers. The best thing about it: The car manufacturer who solves the chip problem first can show the competition the taillights.
The stocks of semiconductor manufacturers like Infineon and ST Microelectronics look promising given the potential for orders from the auto industry. The titles of those automakers who match Renault should also benefit. In the long term, on the other hand, auto suppliers who have previously controlled the business with chips for the auto industry should look into the tube. Unless here, too, innovative solutions are pioneered with chip manufacturers or suppliers will increasingly produce chips on their own in the future. A good example of this is Bosch’s new semiconductor factory in Dresden.
The market for chips for the automotive industry is undoubtedly on the move. Since demand will continue to be high and certainly not dwindling against the background of autonomous driving, stocks of suitable chip manufacturers could offer attractive prospects. In the coming months we should find out exactly how the market is sorted. Investors can follow this development in a relaxed manner – only shareholders of automotive suppliers should reconsider their involvement if necessary.
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