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Beijing fines 3 chip dealers for price gouging as global shortage raises costs for automakers

Beijing fines 3 chip dealers for price gouging as global shortage raises costs for automakers
China’s top market watchdog has handed out a total fine of 2.5 million yuan (some $388,000) to three auto-chip distributors for jacking up their prices amid a prolonged global semiconductor shortage severely hitting the sector.

The State Administration for Market Regulation (SAMR) imposed a fine on Shanghai Cheter, Shanghai Chengsheng Industrial and Shenzhen Yuchang Technologies after a probe, launched by the regulator in August, revealed the distributors inflated car chip prices by 40 times the purchase price.

“SAMR will continue to pay close attention to the chip price index, step up our monitoring of prices, and crack down on illegal activities such as hoarding and driving up prices to maintain the sound order of the market,” the regulator said in a statement.

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In a market with balanced supply and demand, the markup rate of auto-chip traders is normally between 7% and 10%, according to the watchdog. SAMR highlighted that the dramatic hike evoked panic stockpiling among component producers and automakers, exacerbating a supply-demand imbalance and triggering a further increase in prices.

The global chip shortage has had an enormous negative impact, affecting automakers across the world. The crisis, which arose in the second quarter of 2020 due to tight capacity at foundries and increased demand for semiconductors in other fields such as 5G, was aggravated by mounting uncertainty surrounding the raging Covid-19 pandemic.

Chinese authorities were looking to reduce the pressure on the country’s automotive sector that reportedly accounts for every third vehicle manufactured in the world.

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China’s car manufacturing industry, the world’s largest for both petrol-powered and electric vehicles, has suffered a major hit because of the global shortage. According to government data, the country relies on imports for more than 90% of its semiconductor products.

According to the data tracked by SAMR, production of passenger cars in June saw a month-over-month drop of 3.8%, while sales declined by 4.7%.

For more stories on economy & finance visit RT's business section

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