SONG Shiqiang, Huaqiangbei

The Asian Edition of Bloomberg News published at 8:00 GMT on October 19, 2022, an article “China’s Underground Market of Chips Draws Desperate Automakers”, an article about new energy vehicles, Huaqiangbei chip trade of “The No.1 Business Street of Electronic Products in China” and COVID-19 related influences. This article by Bloomberg News similar to its other articles published in the past features "fake, big, and empty” with arguing information. it’s full of doubts, innuendos, and distortions to China's new energy automobile industry and Huaqiangbei Electronic Market. Although some research has been done, unfortunately, the level of cognition with insuficient collected information revealed in this article is still superficial without understanding of the underlying logic of the operation of related industries. Consequently, with a biased analysis model and arrogance and prejudice attitude it came to the conclusion ridiculous to experts.,

For example, Miss WANG, the boss mentioned in the article is a figure far from a typical representative. Additionally, there is little real knowledge and understanding revealed in the article over core issues as the business model of electronic business network in Huaqiangbei, the sales channel control of the original electronic components factory, the strict management on the supply chain for the discrete production model of the automobile factory, the quality control of electronic components, the authenticity detection of components, and other professional issues. In brief, the show-off in the article is adequately visible.

A Screen-shot of Bloomberg News

SONG Shiqiang, General Manager of Shenzhen Kinghelm Electronics Co., Ltd. and Shenzhen SlkorMicro Semicon Co., Ltd. . doing business in Huaqiangbei for 18 years, now is an entrepreneur committing to promoting the BDS\GPS antenna connector of Kinghelm brand and the 1200 V high voltage silicon carbide Field Effect Transistor (FET) of Slikor brand into the supply chain of the new energy vehicle industry. He would like to state from his own entrepreneur experiences on the following aspects to justify the name for China's new energy vehicle industry and boost the morale for Huaqiangbei,

1. Characteristics of the semiconductor industry:

A. The prospective layout of the wafer fab:

The most important feature of the semiconductor industry is the high investment, long cycle, and low return. So the layout of water fab should be very careful to ensure its leading place in competition.

B. The plan and the activation:

In general, the average utilization of the industry is about 70%. However, with stock shortage in the last two years, the number of fabs has increased to 115%, which releases much production capacity. Therefore, the stock shortage of semiconductors for car use is not as big as what is publicized outside.

C. Premium services for large enterprises:

There is no need to restate the value of big customers as automobile factories to original chip manufactures. In time of supply difficulties, chip manufactures as suppliers will do every effort to solve SCM problems to show the value of chip manufacturers as partners. It’s also golden opportunity for chip manufacturers to win more market share from automobile factories and defeat their competitors.

D. The shortage of chip supply basically has little impact on major car makers.

The shortage of electronic components in the past two years had little impact on high-end products such as automotive chips. Because of the high level requirements for automotive chips, large orders, high profits, and stable demand, the wafer fabs would make their best efforts to ensure that they can swap the capacity for low-end product lines whenever necessary.

II. Characteristics of the supply chain of the automobile industry:

The car assembly and production belongs to discrete manufacturing with extremely demanding requirements on the supply chain. this is also the relative advantage of automobile industry developed in recent years in China. The characteristics of the new energy vehicle industry chain exist in the following aspects.

A. Point to point closed-loop service:

The automobile factory supplied by the original semiconductor factory or the instructed agent is the top quality customer with the highest technical requirements for the original semiconductor factory. The qualification requirements for the agent are extremely strict.

B. The electronic component supplier certification

IATF16949 system is one of these systems to ensure the safety of automobile supply chain. Many secondary and tertiary suppliers of automobile factories must pass this certification before they can supply products to automobile factories.

C. Durability test:

Another important test of automobiles is the durability test. It is required that the parts, samples and sample vehicles introduced as new products must be tested under the standard working conditions for 180 consecutive days. it is a long and painful process for new products to enter the automobile supply chain.

D. Incoming material inspection:

In view of the importance of key materials, the Supply Chain Management Department is very strict with the incoming material inspection process and quality standards, especially for core parts.

1. The Automobile Recall System and commercial compensation:

If a certain type of vehicle is recalled in batches, the automobile factory would then lose a lot. Commercial compensation will be paid after the arising of the quality problem. It is particularly important in terms and conditions of the supply chain agreement of automobile manufacturers. An occurrence of commercial compensation may lead to bankruptcy of the automobile manufacturer.

A Survey found that most so-called car chips speculated in Huaqiangbei belong to peripheral products instead of the ABS, ESP related parts asserted by Bloomberg in the article!

III. Inspection of electronic components

When needed, the professional inspection company can help to trace the brand, model, even the production date of elctronic components. Electronic components inspection can be used in causes analysis of failure electronice components, responsibilities defined and trace of some information.

Test results of wafer scraps found in Huaqiangbei

SONG Shiqiang emphasizes fanaly that the test reports from the professional lab is prerequisite for the issuance of a Purchase Order from a customer for both samples and small batches in procurement of expensive chips especially those used in vehicle from Huaqingbei, Too much emphasis on the importance of customer relationship in the Bloomberg article tried to divert people’s attention from the facts that the prerequisite for business in Huaqiangbei is the stock available and the same stock with authenticity!

SONG Shiqiang, General Manager of Kinghelm and Slkor

The author, Mr. SONG Shiqiang

Mr. SONG Shiqiang, a private economic researcher of the Economic Development Center of the State Council, a member of the electronic information expert database of China Association of Science and Technology, and a business research expert of Huaqiangbei.

Company: Shenzhen SlkorMicro Semicon Co., Ltd.

       Contact Person: Mr. Song

       Email: slkormicro@gmail.com，slkormicro@slkoric.com

       Website: http://www.slkoric.com/

       Telephone: +86-0755-83044319

        City: Shenzhen