“The recovery in vehicle sales that began in the second half of 2020 could slow in the coming quarters as semiconductor manufacturers work to match supply with demand,” Beach said.
Beach also noted that “longer-term secular trends” indicate increased demand for automotive semiconductors, in part due to the “shift from internal combustion engines to electrified powertrains” as the industry tightened automotive emissions standards.
In Europe, for example, regulations on vehicle emissions have recently been tightened to a target industry average of 95 g / km carbon dioxide, which is about 27% less than the previous target of 130 g / km. Further reductions are targeted for 2025 and 2030. In the US state of California, new vehicles should be emission-free by 2035.
Data from EVvolumes.com also showed that global electric vehicle (EV) sales increased more than 40% from 2.3 million units in the previous year to 3.2 million units in 2020. However, the numbers accounted for less than 4% of global vehicle sales.
“In the medium to long term, continued growth in electric vehicle penetration for related fixed income issuers should result in attractive relative growth in half-salary per vehicle,” said Beach. “In the past, however, the semiconductor industry has not only experienced times of supply bottlenecks, but also times of surpluses. The current prospects for longer-term secular growth in semiconductor content per vehicle need to be actively monitored for evidence that supply growth is ahead of demand. “