Hyundai Motor Group chases local chipmakers to cut exposure to shortage (updated)
16/06/2021 06:21
(Adds analyst comments)
By Heekyong Yang
SEOUL, June 16 (Reuters) - Hyundai Motor Group is in talks
with South Korean chip companies to help it reduce reliance on
foreign supplies amid a global shortage that has halted assembly
lines at automakers around the world, four people familiar with
the matter told Reuters.
Hyundai officials have met with local "fabless" firms -
which design chips but outsource manufacturing to the likes of
TSMC 2330.TW and Samsung Electronics Co Ltd 005930.KS - as
it explores long-term strategies to better diversify its supply
chain, according to two people at local fabless firms who met
with Hyundai.
The South Korean auto group, which houses Hyundai Motor Co
005380.KS and Kia Corp 000270.KS , wants to shift chips such
as microcontroller units (MCUs) to South Korean designers, the
people said.
Such a shift will be hard, though, because local technology
still lags industry leaders such as Dutch automotive chip
supplier NXP Semiconductors NXPI.O and Japan's Renesas
Electronics Corp 6723.T , industry experts said.
"On top of facing high entry barriers to the auto chip
market, long and strict qualification processes make it more
difficult for smaller chip companies to design auto chips," a
person at a South Korean fabless company said.
"It would take four to five years to supply auto chips,
while it could take less than one year for designing and
producing chips for home appliances," the person said.
"The company is pursuing plans to "localize" auto chips in a
bid to diversify supply chains in South Korea after experiencing
chip sourcing issues, mostly caused by suppliers being outside
of the country," said a person at Hyundai's sister company, Kia.
The South Korean automaker group houses Hyundai Motor Co
005380.KS and Kia Corp 000270.KS .
Hyundai has fared better than global rivals in the first
quarter, thanks to its efforts to stockpile chip inventories in
anticipation of tighter supplies.
But the shortage, exacerbated by factors including a fire at
a chip factory in Japan and storms in Texas, is catching up with
Hyundai. urn:newsml:reuters.com:*:nL4N2KT3ZJ urn:newsml:reuters.com:*:nL4N2MC0IO
The company has suspended production at its South Korean
factories as well as its production in the United States due to
chip shortages. urn:newsml:reuters.com:*:nL1N2M20BS urn:newsml:reuters.com:*:nFWN2NW0QD
The sources all spoke on the condition of anonymity because
the discussions were private.
Hyundai Motor Group declined to comment.
Hyundai Mobis 012330.KS , the group's parts company, said
in a statement to Reuters: "There are no on-going discussions
with relevant companies, and while we think it is necessary to
review chip development in the long term, there are currently no
detailed directions or specific push concerning the issue."
DOMESTIC CONNECTION
Hyundai has also reached out to contract chip makers, known
as foundries, to discuss potential manufacturing plans, a person
with knowledge of the matter told Reuters.
Analysts said South Korean fabless firms such as Silicon
Works 108320.KQ and Telechips 054450.KQ , and foundry owners
such as DB HiTek 000990.KS could work with Hyundai in the long
term, but noted that Hyundai may not have held talks with them.
"Hyundai presented its plans to produce in-house chips, but
we haven't pinned down any specifics yet ... when it comes to
expanding our production capacity, we need to make investment,"
said the person at one of the foundries in South Korea.
"Hyundai seems to believe that there would be enough or even
strong demand for auto chips even after this recent chip
shortage resolves," the person added.
The global chip shortage is expected to stretch to the
second quarter of 2022, according to research firm Gartner.
Analysts noted that foundries are don't like to expand
production capacity for specific customers because it may take
years to recoup spending on equipment and capital investment,
and demand can change quickly.
"Our chips may not become Hyundai's major chips or
substitute those chips already in use, but ours could be
Hyundai's solution in times of shortage or disruption to supply
chains abroad," a senior official at a fabless company said.
(Reporting by Heekyong Yang, additional reporting by Joyce Lee;
Editing by Jack Kim and Gerry Doyle)
((Heekyong.Yang@thomsonreuters.com;))