Traders Cash In On High Demand For Chips By Chinese Firms

From his small office in Singapore, Kelvin Pang is ready to wager a $23 million payday that the worst of the chip shortage is not over for automakers – at least in China.

Photo Insert: China has become ground zero for a crunch that the rest of the sector is gradually getting beyond, and they're focusing their efforts there.

Pang has bought 62,000 microcontrollers, chips that help control a range of functions from car engines and transmissions to electric vehicle power systems and charging, which cost the original buyer $23.80 each in Germany.

He hopes to recoup his investment by reselling them to auto suppliers in Shenzhen, China's electronics hub.

Reuters' Sarah Wu, Jane Lanhee Lee, and Kevin Krolicki reported late on July 19, 2022 that he claims to have turned down offers of $100 for each, or $6.2 million for the entire package, which is small enough to fit in the back seat of a car and is stored for the time being in a warehouse in Hong Kong.

Reuters' Sarah Wu, Jane Lanhee Lee, and Kevin Krolicki reported late on July 19, 2022 that he claims to have turned down offers of $100 for each, or $6.2 million for the entire package, which is small enough to fit in the back seat of a car and is stored for the time being in a warehouse in Hong Kong.

Excess electronic inventory that would otherwise be thrown away is traded by the 58-year-old, who refuses to reveal the price of the microcontrollers (MCUs). He connects purchasers in China with sellers abroad. According to him, the global chip shortage over the past two years has turned a high-volume, low-margin sector into one that has the potential for multi-billion-dollar deals.

For brokers like Pang and others, China has become ground zero for a crunch that the rest of the sector is gradually getting beyond, and they're focusing their efforts there.

According to a Reuters analysis of 100 automotive chips produced by the five biggest manufacturers worldwide, new orders have an average lead time of nearly a year.

Global automakers like General Motors Co., Ford Motor Co., and Nissan Motor Co. have been bargaining directly with chipmakers, paying more per part, and accepting more inventory as a way to counter the supply constraint.

More than 20 people involved in the trade, from automakers and suppliers to brokers and researchers at China's government-affiliated auto research center CATARC (China Automotive Technology Research Center), say the situation is bleaker for China.

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