Chip shortage hitting Korean carmakers

The main entrance of General Motors Korea Bupyeong plant is seen in this photo, Thursday. Yonhap

By Kim Yoo-chul

The continued automotive semiconductor shortage is hitting Korean carmakers, with General Motors Korea announcing plans to halve its vehicle production at its plant here.

General Motors Korea (GMK) said Thursday it decided to halve production at its Bupyeong 2 plant for February. “The decision was because of the shortage of automotive semiconductors. We will focus on exploring the best possible ways to minimize the estimated impact from the shortage through talks with parts suppliers.”

The Bupyeong plant has a daily production capacity of 480 vehicles ― the cut will lead it to monthly production of around 5,000.

The announcement came a few hours after GMK said it would cease production entirely for the week starting Feb. 8. However, it didn't disclose how much volume it would lose or which supplier was causing the chip shortage.

Vehicles affected include the Chevrolet Malibu sedan and other secondary export models. But GMK said its Bupyeong 1 plant and another plant in Changwon, South Gyeongsang Province, will operate normally.

The global automotive semiconductor shortage has been leading top carmakers including Volkswagen, Ford Motor, Toyota and Nissan to cut production. Samsung Electronics, the world's largest memory chip manufacturer, said the auto chip shortage was also hitting mobile phone manufacturing among other sectors.

The warning from Samsung comes as carmakers are lobbying governments for immediate help. The auto chip supply chain is tightly limited with four or five designers controlling the market. Taiwan's TSMC and Samsung Electronics are the major contract manufacturers producing the chips.

The automotive chip shortage was mostly due to the shift by TSMC and Samsung Electronics toward expanding output of chips for consumer electronics as the COVID-19 pandemic led top car manufacturers to cut production last year. But solid demand for electric vehicles (EVs) and a gradual recovery in vehicle output since late last year have awakened idling demand for auto chips.

“The semiconductor shortage is disrupting automotive production and may delay a recovery of new vehicle sales and profitability in the sector. Carmakers are reducing output and selectively idling plants until the shortage eases, which we expect to take several months,” Fitch Ratings said in a recent report to clients.

Hyundai Motor Group said it has maintained automotive chip inventory levels, added it has no plans to cut production. “We don't see any significant problems in automotive chip inventory levels through the first half of the year,” said an official at Hyundai Mobis, Hyundai Motor's top parts supplier.

Renault-Samsung Motors said it has no critical issues regarding the procurement of automotive chips.

Analysts say it is tough to say exactly how long the automotive chip shortage could last, while UBS investment bank said it was expecting the supply-demand mismatch will improve sometime in the third quarter.

But this time, unlike in the past, because COVID-19 has caused multiple factory closure across a lot of industries, everything from auto chips to ceramic capacitors is now a problem, meaning the shortage will delay any visible recovery in the auto sector.

Taiwan's TSMC said it will prioritize chip supplies for car manufacturers following a request from the U.S. government.