Trade war triggers fear of new EV chip shortage from China export limit

Leading authorities in the industry fear another chip shortage could soon hit electric vehicle (EV) manufacturers. This comes as China limits the export of two significant metals, a move driven by the ongoing trade dispute between Washington and Beijing, as reported by the Federation of Thai Industries (FTI).

As of August 1, China will impose trade restrictions on select products composed of gallium and germanium. These two elements play a crucial role in the manufacturing of chips and EVs. With this move, fears mount for potential disruptions to global supply chains and an escalation of the trade war with Washington.

While the statement from Beijing attributed this clampdown to concerns of national security, industry analysers interpret it as a counterblow to the alleged US initiatives aimed at thwarting China’s technological progress.

The easing of the chip shortage from March onwards in Thailand had given some relief to automakers, contingent on semiconductors for manufacturing. However, this fresh restriction has incited renewed worries of a potential chip shortfall, as observed by Kriengkrai Thiennukul, FTI’s chairman.

He believes, besides the US-China trade war, geopolitical conflicts like the tension between China and Taiwan could adversely affect the semiconductor-based supply chains and chipmaking industry.

Earlier, chip shortages were significant challenges for the automotive and IT industries. These were caused due to stringent lockdown regulations imposed by China during the pandemic and subsequent disruptions caused by the Russia-Ukraine conflict. Consequently, several Thai car companies faced delays in model deliveries.

Kriengkrai also pointed out that many enterprises started hoarding these raw materials in the wake of this situation, and some are stocked up for the next two to three months.

The knock-on effect of this chip shortage might lead to Thai car manufacturing missing its annual target. The FTI’s Automotive Industry Club had an objective of producing 1.95 million cars including EVs by 2023, with 1.05 million units produced for export.

EVs are pivotal to Thailand’s bid for industrial modernisation, so much so that it is looking to expedite investments in EV-related projects. A good number of project applications submitted to the Board of Investment for promotion from January to June focused on targeted sectors such as electronics, food processing, and automotive, especially those involving the EV supply chain, reported Bangkok Post.