Hyundai Motor braces for continued automotive chip shortage

By Baek Byung-yeul

Despite posting improved performance in the January-March period this year, Hyundai Motor expected the global automotive semiconductor shortage to continue as an acute supply-demand imbalance looks hard to overcome in a short period.

“Until the first quarter, we had no factory shutdowns or rescheduling of car manufacturing plans in both our local and overseas factories, because we had agilely responded to the chip shortage issue by boosting chip inventories,” a Hyundai Motor official told investors during a conference call upon announcing its first-quarter results, Thursday.

“Despite such efforts, however, the global chip shortage issue is still persisting due to external factors, such as the Texas cold-snap and fire damage at the Renesas chip plant,” the official added.

Chip makers have been hit hard by bad weather and natural disasters. Samsung Electronics, NXP and Infineon had to shut down their contract-based chip factories in Texas in February due to power outages after an unprecedented winter storm. An earthquake in Japan in February also worsened the chip shortage as No. 3 automotive chip maker, Renesas Electronics, shut down its factory after a 7.3-maginitude earthquake hit the country.

This has left the global automotive industry struggling with a chip shortage for months, forcing automakers to suspend production. The shortage stems from soaring chip demand for IT gadgets and home appliances that are selling like hot cakes as more and more people work and study at home during the COVID-19 pandemic.

Due to the shortage, Hyundai Motor temporarily suspended the production of several car models starting from April and this is expected to continue in May.

“Production suspensions are occurring at our Ulsan and Asan factories. Some factories are trying to reduce the production volumes of some models that are affected by the chip shortage. We presume that the production rescheduling will continue in May at a similar level higher compared to April, so we are trying our best to minimize disruptions by adjusting production priorities,” the official said.

A growing number of global automotive manufacturers are trying to produce their own EV batteries and Hyundai Motor said it is also working on internalizing battery and component production.

“To respond to the expanding EV market, we are working on developing batteries for each market and each car segment. Not only lithium-ion batteries, but we also aim to develop our own solid-state battery,” the company official said.

“The company is especially focusing on developing its own solid-state battery. We are scheduled to produce a demo version of a solid-state battery-powered car in 2025. By 2027, we aim to be ready for mass production and begin actual rollouts in 2030,” he added.

Hyundai Motor said its operating profit in the first quarter increased by 92 percent year-on-year to 1.657 trillion won ($1.48 billion). Sales also rose 82 percent to 27.39 trillion won over the same period, thanks to robust sales of SUV models and Genesis luxury cars.