China Going For Auto Chip Dealers: To Investigate If They Manipulated Prices Taking Advantage Of Global Shortages

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china going for auto chip dealers: to investigate if they

China’s regulatory authorities have been imposing a heavy hand in recent months. Jack Ma’s Ant group as the starting gun, Didi recently or entertainment technology are some of those affected. Now they go for another sector: that of the distributors of chips for automobiles. They believe that they carried out illegal practices to increase the prices of the chips.

China’s antitrust watchdog has initiated a research on auto chip distributors. They are suspected of having accumulated chips to intentionally raise prices amid the global chip shortage crisis. The announcement about the investigation was made this Tuesday, although they have not named any specific company.

The global chip shortage itself is believed to be the main cause of the price hike. The lack of production has caused prices to rise due to higher demand than supply. However, it is possible that Illegal actions such as retention of chips may have contributed to further increase prices. China says it will severely punish these illegal actions if they are found.

It should be noted that they are referring to intermediaries between the chipmaker and the automaker. That is, the companies that are involved for companies like Ford or Volkswagen to buy the chip from companies like TSMC.

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In the midst of a global semiconductor crisis

Had this chip retention practice occurred, it would have occurred at the worst possible time, in the midst of a global semiconductor crisis. The effects of the lack of chips have been noted especially in car manufacturers, which are the first to stop receiving chips to incorporate into their vehicles.

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Although we have seen how the lack of chips has caused delays in the launch of mobile phones, computers and other devices, where it has been most noticed is in cars. Many manufacturers have in fact temporarily closed factories due to the inability to produce cars without the necessary components.

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Why the car industry? Because the chips they use are especially simple and consequently cheap compared to mobile or computer chips. Because of this the profit margins for semiconductor manufacturers are minimal. Likewise, they are usually smaller orders in quantity than those of a mobile manufacturer. The result of this is that chipmakers prefer to focus their efforts on large customers with large orders and higher profit margins per unit (aka mobile manufacturers like Apple and Samsung).

According to estimates from Intel, Foxconn, and other industry entities, lhe global chip shortage may last at least until early next year. Factories, no matter how much they are at maximum production capacity, have a huge bottleneck. Likewise, the construction and start-up of new factories also takes time.