Current Date: 17 September, 2021

China Is Trying To Control Rising Semi Prices By Fining Auto Chip Manufacturers

China Is Trying To Control Rising Semi Prices By Fining Auto Chip Manufacturers

China is taking a page out of the Keynesian central banking playbook on how to micromanage an entire economy and is now reportedly fining auto chip sales companies for driving up prices. 

And, like central banks will soon find out, we expect China to find out the hard way that you can't print, fine or tax your way to productivity. 

The price increases are likely a normal result of a shortage of supply in semiconductors, which has plagued auto manufacturers for the better part of the last year.

China's State Administration for Market Regulations said it had fined three local companies a total of 2.5 million yuan, according to a report in Automotive News Europe. 

The companies fined included Shanghai Chengsheng Industrial, Shanghai Cheter and Shenzhen Yuchang Technologies. 

Further, the regulator said it would continue to "closely monitor" prices and "crackdown on illegal market behavior". You know, like letting supply and demand set prices...

Recall, we noted just days ago how the semi shortage, combined with a Covid outbreak in South Asia, were causing auto manufacturers to slash production targets. 

Toyota is the latest legacy auto manufacturer to come out and announce it is revising its full year production forecast by about 300,000 units to 9 million units for the year, Bloomberg reported Friday morning.

The company is citing the Covid outbreaks in Southeast Asia that we have written about extensively, as well as continued shortages resulting from the semiconductor drought. 

Output will be lower by 70,000 units in September and 330,000 units in October, the automaker said. It says its outlook for November, only two months away, is still "unclear" despite "very strong" demand. 

We had cited Malaysian Covid outbreaks as throwing a wrench into the gears of already-stressed auto manufacturing plans for the summer. IHS predicts that 2.1 million units could wind up being lost in the third quarter of 2021 alone. 

Malaysia is home to names like Infineon Technologies AG, NXP Semiconductors NV and STMicroelectronics NV, who all have operating plants in the country. With Covid infections soaring locally, plans for lifting lockdowns and re-opening production looked as though they could fall by the wayside last month. Daily infections were up to 20,000 per day in August, up from just 5,000 per day in late June. 

 

Tyler Durden Mon, 09/13/2021 - 02:45

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