Hyundai Turns To Local Businesses For Chips To Diversify Supply Chain | Automotive Industry News

The Hyundai Motor Group is in talks with South Korean chipmakers to help it reduce its dependence on foreign supplies amid a global shortage that has disrupted the assembly lines of automakers around the world, four people familiar with the matter told Reuters.

Hyundai officials met with local ‘factory-less’ companies – which design chips but outsource manufacturing to TSMC and Samsung Electronics Co Ltd – as it explores long-term strategies to better diversify its supply chain , according to two people from local businesses without a factory. who met Hyundai.

The South Korean automotive group is keen to shift some of its orders for automotive chips such as microcontroller units (MCUs) to South Korean designers, but the technology there is still lagging behind industry leaders such as the supplier. Dutch auto chip NXP Semiconductors and Japanese Renesas Electronics Corp, according to People.

“In addition to facing strong barriers to entry into the automotive chip market, long and stringent qualification processes make it more difficult for small chip companies to design automatic chips… it would take four to five years to complete. supply automatic chips, when it could take less than a year to design and produce chips for household appliances, ”said a person from a South Korean factory without a factory.

Company pursues plans to ‘localize’ automotive chips in order to diversify supply chains in South Korea after encountering chip supply issues, mainly caused by suppliers located outside the country said someone from Hyundai’s sister company, Kia.

The South Korean automaker group is home to Hyundai Motor Co and Kia Corp.

Tighter supplies

Hyundai fared better than its global competitors in the first quarter, thanks to its efforts to stockpile inventory of chips in anticipation of a supply crunch.

But the shortage, exacerbated by factors such as a fire at a chip factory in Japan and storms in Texas, is catching up to Hyundai.

The company has suspended production at its South Korean factories as well as production in the United States due to chip shortages.

The sources all spoke on condition of anonymity as the discussions were private.

Hyundai Motor Group declined to comment.

Hyundai Mobis, the group’s parts company, said in a statement to Reuters: “There are no ongoing discussions with the companies involved, and although we believe there is a need to look at the development long-term chips, there are currently no detailed instructions or specific pushes regarding the matter.

Local businesses

As it explores ways to secure chip designs from local factory-less companies, Hyundai has also reached out to contract chipmakers, known as foundries, to discuss potential manufacturing plans, said in Reuters someone with knowledge of the subject.

“Hyundai has laid out its plans to produce chips in-house, but we have yet to define details … when it comes to expanding our production capacity, we need to invest,” said the person from one of the foundries in South Korea. .

“Hyundai appears to believe that there would be sufficient or even strong demand for automotive chips even after this recent chip shortage is resolved,” the person added.

The global chip shortage is expected to extend through the second quarter of 2022, according to research firm Gartner.

Analysts have noted that foundries do not like increasing production capacity for specific customers, as it can take years to recoup capital and equipment expenses, and demand can change quickly.

“Our chips may not become Hyundai’s main chips or replace chips already in use, but ours could be Hyundai’s solution to shortages or disruption in overseas supply chains,” a senior said. manager of a company without a factory.

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