Kim Hyun-bin began his journalism career at Arirang TV from 2012 to 2017, specializing in defense, foreign affairs and the economy. In 2018, he joined The Korea Times, covering society and business, and is currently responsible for embassy affairs.
Chip constraints create domino effect in Korea's auto industry
Thousands of Hyundai vehicles are parked at its Ulsan plant waiting to be shipped overseas. Yonhap
By Kim Hyun-bin
By Kim Hyun-bin
The global chip shortage has impacted major automakers worldwide and Korea is also seeing a domino-like effect with consecutive shutdowns of plants at major local powerhouses such as Hyundai, Kia and GM Korea.
The shutdowns have impacted best-selling lineups ― Hyundai will halt production of its Grandeur and Sonata sedans, Monday, as will GM Korea with its Chevy Trailblazer.
The Grandeur has been Hyundai's bestselling model for four consecutive years with over 145,000 sold locally last year, and there are worries the suspension could drastically affect its profitability, as the move comes after the company halted production at its Ulsan plant of the IONIQ 5 electric vehicle and Kona SUV from April 7 to 14, due to parts shortages.
The Ulsan plant suspension is expected to cause a shortfall of 6,000 Konas and 6,500 IONIQ5s. Last week, work at the company's Asan plant was also suspended for two days.
GM Korea was among the first local automakers to be impacted by the chip shortage, which has forced it to limit its TRAX production to 50 percent of capacity since February. The company will close two of its three plants next week.
The No. 1 and No. 2 plants in Incheon, will be closed from April 19 to 23 due to the shortage, which is expected to cause lost sales of 4800 Trailblazers and 1,200 Trax SUVs.
“Due to the vehicle chip shortage, local carmakers are expected to produce less than 120,000 vehicles,” Lee Hang-gu, a researcher at the Korea Automotive Technology Institute, said.
The government has been in emergency meetings to bolster the recovery of the “big three” sectors: future automobiles, bio health and system semiconductors. However the vehicle OEM market has been suffering from a supply shortage of micro control units (MCU) and industry watchers believe it will be difficult for the government to help in this situation.
Samsung Electronics HQ in Seoul
Last week, Intel CEO Pat Gelsinger announced plans to produce automotive semiconductor chips within six to nine months. Intel plans to spend $20 billion to expand its chip making capacity, while Taiwan's TSMC plans to invest $100 billion over the next three years to increase production capacity. All eyes are on whether Samsung Electronics will follow suit.
Most automotive chips heavily rely on MCUs, for which manufacturers such as NXP, Renesas and Infineon hold the technology, while 70 percent of their production is outsourced to TSMC.
Samsung Electronics does not produce chips for MCUs and industry watchers believe it will be unlikely the tech giant to start such development.
“It will be difficult to reach economies of scales as prices for MCUs are fairly low, and a high level of safety is required for the units to meet standards for use in vehicles ― a standard which take years to reach,” an industry official said. “Also the shortage in chips was caused by supply chain issues with semiconductor plants forced to shut down as a result of various events including natural disasters.”