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Hyundai Motor seeks chips from local companies to diversify its supply chain

Four people familiar with the matter told Reuters that Hyundai Motor Group is negotiating with South Korean chip companies to help it reduce its dependence on foreign supplies, as global shortages have caused assembly lines for global automakers to shut down.

According to two sources from a local fabless company, Hyundai officials have met with local “fabless” companies-these companies design chips but outsource manufacturing to companies such as TSMC and Samsung Electronics Co., Ltd.- Because it is exploring long-term strategies to better realize the diversification of the supply chain who met Hyundai.

Korea Automobile Group hopes to transfer some of its automotive chip orders such as microcontroller units (MCU) to South Korean designers, but the technology there still lags behind industry leaders such as Dutch automotive chip supplier NXP Semiconductors and Japan’s Renesas Electronics Corporation. people.

“In addition to facing high barriers to entry in the automotive chip market, the long and strict certification process makes it more difficult for small chip companies to design automotive chips… It takes four to five years to supply automotive chips, and it may not be necessary to design and design for home appliances. A year of producing chips,” said a person from a fabless company in South Korea.

A person from Hyundai Motor’s sister company Kia said: “After encountering chip procurement problems, the company is pursuing a plan to’localize’ automotive chips in order to diversify the Korean supply chain. Caused abroad.”

This South Korean car manufacturer group owns Hyundai Motor Company and Kia Corporation.

Tight supply

Hyundai’s performance in the first quarter outperformed its global competitors, thanks to its efforts to accumulate chip inventories in anticipation of tight supply.

However, due to factors such as a fire in a chip factory in Japan and a storm in Texas, the shortage is catching up with Hyundai.

Due to a shortage of chips, the company has suspended production in its South Korean and American factories.

Since the discussion was conducted in private, the sources requested anonymity.

Hyundai Motor Group declined to comment.

Hyundai Mobis, the component company of the group, said in a statement to Reuters: “There is no discussion with related companies yet. Although we believe it is necessary to conduct a long-term review of chip development, there is currently no detailed direction or Specific promotion of this issue.”

Local company

A person familiar with the matter told Reuters that while exploring ways to obtain chip designs from local fabless companies, Hyundai Motor also contacted the foundry to discuss potential manufacturing plans.

“Hyundai has proposed a plan to produce internal chips, but we have not yet determined any specific details…In terms of capacity expansion, we need to invest,” said a person from a South Korean foundry. .

“Hyundai seems to believe that even after the recent chip shortage is resolved, the demand for automotive chips will be sufficient or even strong,” the person added.

According to research company Gartner, the global chip shortage is expected to continue into the second quarter of 2022.

Analysts pointed out that foundries do not like to expand capacity for specific customers, because it may take years to recover equipment and capital investment expenditures, and demand may change rapidly.

“Our chips may not become Hyundai’s main chips or replace those that are already in use, but our chips may be Hyundai’s solution when there is a shortage or interruption in the supply chain abroad,” said a senior executive of a fabless company. The official said.

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