China MCU industry may face major reshuffle

Annie Huang, Taipei; Eifeh Strom, DIGITIMES Asia 0


Chinese microcontroller unit (MCU) suppliers are currently offering prices that are more than 30% lower than larger foreign competitors due to sluggish market demand. Second- and third-tier Chinese MCU makers dealing with a lack of orders may result in a significant industry reshuffle, according to industry sources in China.

In the second half of 2022, major international manufacturers that focused on automotive and industrial control, such as STMicroelectronics (STMicro), NXP Semiconductors, Texas Instruments (TI), and Microchip Technology, began shifting toward the midrange market, taking market share from Chinese and Taiwanese MCU manufacturers.

Uncertainties going into 2023 left end market demand unclear. Falling market demand slowly spread to major international manufacturers, resulting in customers cutting orders.

Compared with Chinese MCU makers, capacity and product quality from international manufacturers is more stable. Coupled with a certain demand from the automotive and industrial control sectors, it has been reported that STMicro, NXP, TI, Renesas Electronics, and Microchip are increasing prices for some products and providing capacity only after raising prices.

Microchip launched its Preferred Supply Program (PSP), which requires customers to place a 12-month non-cancellable backlog and gives them capacity priority for the second six months of the next 12-month period.

Industry players say the PSP phenomenon continues in 2023 among major international manufacturers, but first-tier Chinese manufacturers are also likely to receive more design-in opportunities as a result.

As the MCU industry comes off the peak of the past two years, price wars have intensified as companies work to clear inventories.

Sources pointed out that lead times for 8-bit and 32-bit MCU products are 26-52 weeks, while lead times for other products continue to fall. Lead times for certain major international manufacturers are still on the high side but have generally shortened.

Lead times for automotive MCUs are still over 40 weeks. Infineon's automotive-grade MCUs are still being distributed but the price has remained flat for two consecutive quarters.

During the MCU shortage over the past two years, many second- and third-tier MCU companies were established through loans in China; however, reduced demand in 2023 has made it difficult for these companies to get orders.

At the same time, customers have concerns dealing with second- and third-tier Chinese MCU makers, including fear of bankruptcy and problems with homogenization, sources said. If market conditions continue to be poor in 2023, it could lead to a major reshuffle of the Chinese MCU market.