Hyundai suspends US factory operations
Hyundai Motor's plant in Alabama, the U.S. / Courtesy of Hyundai Motor
By Kim Yoo-chul
Hyundai Motor Group, the country's leading vehicle manufacturer, has suspended its production facilities in the United States due to the shortage of automotive semiconductors, it said Monday.
“Hyundai Motor will suspend operations of the company's factory in the U.S. state of Alabama for five days from June 14. The decision will only affect Hyundai Motor's vehicle assembly lines,” the company said, adding that lines assigned to manufacture vehicle engines for use in the plant for its sister-company, Kia, in the U.S. state of Georgia, will be operational.
During the pause in production, Hyundai Motor is set to perform plant maintenance and it expects to resume full operation from June 21.
Its Alabama assembly plant in the city of Montgomery is where it manufactures its Sonata and Elantra sedans as well as its Santa Fe SUVs. The company is investing more than $400 million to expand the facility to build a compact pickup truck, the Santa Cruz.
“Yes, we don't have plans to manufacture vehicles at the company's Alabama plant this year. However, that doesn't mean the plant will be stopped completely, as some lines will still be operational. Hyundai Motor will offer support measures to employees who will be affected by the suspension, and we plan to normalize factory operations after the scheduled summer break,” the company added.
The semiconductor chip shortage is also continuing to cause some output disruption to Hyundai Motor's local plant as the company separately said that it will halt the lines manufacturing Sonata and Grandeur sedans at its local plant in Asan, south of Seoul. The chip shortage previously forced the Asan plant to stop output from April 12 to April 13, April 19 to April 20, and May 24 to May 26.
“Hyundai Motor is planning to realign its automotive chip supply chain by procuring more from its plants in other countries for the United States to help fill the void of the production halt due to the chip shortage. But it will have to adjust downward its production schedules for this year,” said Lee Jae-il, an auto analyst at Eugene Investment.
Hyundai Motor isn't alone, as many global vehicle manufacturers have been forced to halt production temporarily due to the chip shortage. Partly thanks to U.S. President Joe Biden's request to major auto chip manufacturers, including TSMC (Taiwan Semiconductor Manufacturing Company, Limited), the chip supply has been showing signs of improvement. However, ironically, Hyundai Motor's situation has been exacerbated by the industry's faster rebound from the pandemic than that of other factories that have seen lengthy closures.
Interestingly, vehicle manufacturers were ramping up production to respond to the inventory shortage, putting them into competition for chips with the consumer electronics industry, as the latter was facing its own surge in demand. Regarding the specifics, Hyundai officials remained reluctant to discuss the details of the shortage openly.
“The reason for the shortage is that chip suppliers have been pushing to bulk up the output of automotive chips. However, there are limits as well as the question of how fast chip suppliers can respond, due to high costs and lowered efficiency. Automotive chips aren't profitable to manufacture, as they normally use outdated 8-inch wafer technology, which is difficult to update,” said an executive at the country's top-tier semiconductor company by telephone, adding that the chip shortage may see recovery from the fourth quarter of this year.