Electric vehicle (EV) manufacturers may encounter another chip shortage following China's recent decision to restrict the export of two metals as a result of the US-China trade dispute, says the Federation of Thai Industries (FTI).
Beijing's announcement of trade controls from Aug 1 on some gallium and germanium products, which are used in the chip and EV industries, is expected to disrupt global supply chains and intensify the trade war with Washington, according to media reports.
The Chinese government said the restriction is aimed at protecting national security, but analysts view it as a response to the US's alleged attempts to curb China's technological advances.
Chip scarcity in Thailand eased starting in March, relieving the concerns of automakers who require semiconductors in their production processes.
"The FTI is closely monitoring the impact of the rare earth restrictions because many industries, including EV and electronics, fear a chip shortage," said Kriengkrai Thiennukul, chairman of the FTI.
The trade war between the US and China as well as geopolitical conflicts such as the tension between China and Taiwan are among the factors that could affect the chipmaking industry and supply chains that are based on semiconductors, he said.
Previously, manufacturers in the automotive and IT industries were hampered by chip scarcity caused by the harsh lockdown measures in China to contain the spread of Covid-19 and the impact of the Russia-Ukraine war.
Car companies in Thailand were forced to delay the delivery of some models to customers because of this problem.
"Both metals are used in the EV industry. Many companies are now stockpiling these raw materials and some already have sufficient stocks to use for 2-3 months," said Mr Kriengkrai.
Chip scarcity could also cause car manufacturing in Thailand to miss its target for this year.
The FTI's Automotive Industry Club set a 2023 car production target, including EVs, of 1.95 million cars, with 1.05 million units produced for export.
The government is promoting EVs as one of the targeted S-curve industries in Thailand, and investment in EV-related projects is rising.
Between January and June this year, 464 of 891 new project applications submitted to the Board of Investment for promotion focused on these targeted industries, including electronics, food processing and automotives, particularly the EV supply chain, according to the board.
