Chip prices are too low will affect manufacturers' enthusiasm for expansion

The global chip shortage has lasted for nearly a year. The shortage of production capacity and price increases will definitely not be resolved this year. Can supply and demand balance by 2022? The parties also have different opinions. Infineon's CEO stated on the current situation that if the chip price is too low at this time, it will be detrimental to the increase in global production capacity.
 
According to a Reuters report, Infineon's chief executive officer (CEO) said that in the face of demand, Infineon will continue to increase its chip shipment prices.
 
As for the reason for the price increase, Reinhard Ploss said that Infineon’s chips are not 100% manufactured by itself, and some are found in fabs. Now the price of foundry has risen and the cost has increased. These costs are bound to be passed on to customers.
 
Reinhard Ploss emphasized that from the current situation, if the price of the chip is too low, then the power of the foundry to include production will also decline, which will not be conducive to the current global chip shortage.
 
Infineon’s largest automotive chip division (ATV) revenue in the third quarter (as of June 30, 2021) increased by 49% year-on-year to 1.205 billion euros, but decreased by 1% compared to the previous quarter, mainly due to production capacity Due to restrictions, the division's profit margin rose to 16.5% from 16.2% in the previous quarter.
 
Ploss pointed out in early August that inventories are at the lowest level in history, and any epidemic prevention-related restrictions imposed on the manufacturing industry (such as Malaysia) will have particularly serious consequences.
 
Reinhard Ploss believes that the shortage of chips may worsen and continue until 2023. On the one hand, the current gap is large. Mobile phone chips are short of 20%, and other chips are short of 10%. During the epidemic, the demand for remote office and education has increased, and factories have closed due to the epidemic, which has put more pressure on chip supply. The chip shortage in the entire automotive industry will continue into the first quarter of 2022, and may further delay.
 
The report analyzes that, just like fab capacity, packaging capacity should also be expanded. However, the profit margin of the packaging and testing process is much lower than that of the fab, so manufacturers’ attitudes to increase production will appear more hesitant. Recently, there is industry news that the three major domestic IC packaging and testing plants have increased their quotations for urgent orders for mature processes by 20~ 30%.