Does Hyundai Make Their Own Chips?

Due to a lack of automotive chips in the industry, August and September of last year were some of the hardest months for Hyundai Motors. Fortunately, Hyundai survived those challenging months, and the COO issued a statement announcing that Hyundai will begin manufacturing its own chips and lessen their dependency on chipmakers. The industry as a whole saw a 1.98 million vehicle reduction in North American output as a result of the scarcity, not just Hyundai. Many car firms are on the upswing following this difficult year of shortages and financial losses, especially Hyundai, which will continue to increase sales.

Hyundai purchased chips while competitors did not, and its production lines are still running.

Worldwide production cuts due to the scarcity, particularly at Volkswagen and General Motors, have prompted Germany and the US to step up their efforts to address the issue.

The only other major automakers to have kept a stockpile of low-tech processors to help them continue production are Hyundai and its sister company Kia Corp and Japan’s Toyota Motor, which indicated last month that it has enough inventory to last it approximately four months.

But if it doesn’t lessen soon, the shortfall might affect Hyundai as well, two of the people familiar with the company’s acquisitions said, as restricted capacity on factory floors starts to pressure output of even high-tech vehicle semiconductors.

The South Korean automaker continued to purchase chips even as competitors reduced orders to reflect the pandemic’s impact on the market for semiconductors.

Analysts claimed that this more conservative view of inventories, a divergence from automakers’ traditional just-in-time strategy, was influenced by earlier occurrences that disrupted Hyundai’s supply chain and forced it to halt production.

One of the individuals with direct knowledge of Hyundai’s acquisitions stated that the company had “plans to curtail output at the beginning of the year because of COVID-19, just like other automakers.”

The source was referring to a rush of purchases by gadget makers that swallowed up most chipmaking capacity. “But procurement read the pattern of the semiconductor sector cutting auto chips output and said, ‘If we don’t buy them as well, we’ll be in difficulty later on,'” said the person.

The majority of the production for chipmakers that feed the auto industry is outsourced to contract manufacturers like Taiwan’s TSMC, according to analysts, who frequently give orders from electronics clients priority because they generate almost all of their money.

According to one of the sources with firsthand knowledge of the auto chip industry, Hyundai nevertheless purchased fewer chips in 2020 than it did in 2019. However, the insider claimed that it significantly increased buying in the quarter that ended in December.

Because they are not authorized to speak to the media, the people declined to be named.

Analysts stated that the company’s strategies were likely inspired by its experiences with China and Japan as well as the fact that Hyundai’s domestic market remained largely stable throughout the pandemic.

In early 2020, while the coronavirus was spreading in China, production was halted in Hyundai and Kia’s facilities due to a scarcity of a part from China. Hyundai learned from a diplomatic disagreement with Japan in 2019 that had an impact on supplies of chemicals at South Korean chipmakers.

In this stock photo, workers at the SsangYong Motor Pyeongtaek facility in Gyeonggi Province are putting together an automobile engine. Korea Times document

Through Kim Yoo-chul The demand for automotive chips is outpacing supply, which is causing a crisis in the worldwide IT and automotive industries. Major automakers have been directly harmed by this supply-demand imbalance. Hyundai Motor Group is not exempt from this dilemma; the nation’s leading automaker has lost a sizeable portion of its manufacturing output and has had to cease operations due to the ongoing shortage of automotive chips. Carmakers will remain impacted for some time to come because there is no apparent end in sight. According to officials and insiders familiar with the situation, Hyundai Motor is emphasizing the necessity for a self-sufficient and vertically integrated structure, from components to completed goods, to prevent further shortages. “It appears that Hyundai Motor wants to take control of its own supply chain resiliency. The main idea is that Hyundai Motor intends to boost the use of semiconductors in its production process by improving its ability to design components and use technology “a senior business executive stated. Sources claim that Hyundai Mobis, the automotive group’s component subsidiary, was involved in choosing regional fabless production facilities and component designers as a first step towards producing its own car semiconductor chips. They claimed that in order to safeguard its confidentiality, Hyundai Mobis entered non-disclosure agreements (NDA) with various businesses in which it has an interest. Hyundai Mobis has designated as its top priority the internal development of its own MCU, PMIC, and ADAS technologies, which are seen to be essential in vehicle entertainment systems. Hyundai Motor said it is on track to investigate the greatest opportunities with regard to the potential for working with regional suppliers to integrate automotive chip technology. However, it made no mention of the names of any local suppliers it is in contact with. Such actions are necessary since any supply chain disruption might negatively affect Hyundai’s plans for its vehicle pipeline. The problem is that the group’s current automotive chip clients may not agree with its vertical integration plans. “It’s easy to understand why. Carmakers’ attempts to lessen their reliance on chip-sourcing by internalizing automotive chip-making technologies could restrict access to product development at other companies, as automotive semiconductors have long been purchased from specialized clients like Infineon Technologies and NXP Semiconductors “said a different industry executive. This is comparable to the complex alliance between Samsung and Apple. Samsung is Apple’s main rival, but the South Korean tech giant is also one of the company’s key component suppliers. Apple creates its marquee products, leaving the component supply to its Asian suppliers. Samsung Electronics, Samsung Electro-Mechanics, and Samsung SDI were its top component suppliers, according to the “2021 Apple Supplier List.” Apple asserted Samsung is in a position to share its product development strategies with other business units, giving them access to sensitive information and enabling them to release Samsung products ahead of schedule, when it sued Samsung in 2011, alleging that the competitor had copied the look and feel of the iPhone. “No major automaker wants to see the ties they have had for years with manufacturers of automotive chips fray. However, efforts to integrate related technology can be justified by the ongoing chip shortage. Although it appears to be extremely dangerous, it is one that is worthwhile in the long run “Added the second source. Stephen Dyer of AlixPartners in Shanghai conducted a study that found up to 1,400 chips in the average modern automobile. But as the industry continues to move towards electric vehicles (EVs) and, eventually, self-driving cars, that number will only rise.

Hyundai believes producing its own chips will address the shortage issues

Yes, the shortage of automotive chips is still present, and manufacturers are responding in various ways both internally and publicly. Almost all of them are experiencing brief plant shutdowns and production declines, although some have made plans to take more aggressive measures than others to avoid this from happening again. It includes Hyundai.

Jose Munoz, the worldwide chief operating officer of the Korean automaker, announced the company’s aim to create its own semiconductors in-house. Of course, the goal is to reduce reliance on outside semiconductor producers. Munoz claims that although these businesses have responded rapidly to the constantly shifting needs of a world devastated by the ongoing pandemic, it still wants more control over the issue. The CEO told Reuters, “We want to be able to build our own chips within the group, so we are a little bit less dependent in a future circumstance like this. “This requires a significant financial commitment and amount of time, but we are working on it.”

According to Munoz’s comments, Hyundai Mobis, the automaker’s fully owned parts supplier, will likely handle a large portion of this development rather than the company itself. But it’s not obvious how far the word “develop” goes. Although Munoz doesn’t specifically claim that the automaker intends to mass-produce chips, the fact that its component manufacturing company could handle most of this suggests that it’s plausible.

In spite of the fact that Hyundai had to shut down a few factories due to a lack of supplies, it should be noted that only Toyota and Tesla have been able to raise their global sales this year. For the former, it’s uncertain how long this surge will remain. After the Fukushima nuclear disaster, it stockedpiled essential resources like semiconductors, but it didn’t take long for that supply of chips to run out. In September, production was just reduced by 40%.

And in the rest of the car industry, the situation is still far from ideal. General Motors, for example, was had to eliminate a number of features from a range of cars, even removing the Super Cruise driving aid system from Cadillac’s flagship Escalade. Other automakers have also had to make significant budget cuts. Even while Hyundai is progressing, there is still a long way to go until things are back to normal.

The production of automotive semiconductors by Hyundai

Hyundai recently declared that it will start producing its own automotive semiconductors in order to ensure its own supply chain as it enters the electric car market, recognizing the difficulties the semiconductor sector faces. What will Hyundai be doing, why are EVs particularly impacted by the lack of semiconductors, and may other manufacturers begin producing their own silicon?

Who makes the chips for Hyundai automobiles?

According to the newspaper’s citation of an anonymous industry source, Hyundai Motor, one of the top 10 largest automakers in the world by sales along with subsidiary Kia Corp (000270.KS), wants to internally develop a silicon carbide technology-based power chip.

Automobile manufacturers were compelled to suspend production and cut work shifts due to a lack of semiconductor chips caused by pandemic interruptions and manufacturing problems at chip facilities.

The system chip producer Magnachip Semiconductor Corp (MX.N) collaborated with Hyundai’s research center and its car parts subsidiary Hyundai Mobis Co Ltd (012330.KS) to lead the chip design process, according to the publication.

Unnamed Hyundai Motor official informed the newspaper that the company planned to use its own power chip in a new automobile that would be released in the second quarter of the next year.

The Ioniq 6, Hyundai’s dedicated electric vehicle anticipated for release next year, may be the next vehicle model using the chip, according to The Seoul Economy Daily. According to Hyundai, the timing of the chip manufacture has not been determined.

Where does Hyundai purchase its chips?

In the past two years, the automotive industry has experienced two devastating tragedies. First, the pandemic caused chaos with worldwide lockdowns and ensuing facility closures as a result of infections. And as a result, all automakers had to drastically scale back their manufacturing as a result of a global shortage of semiconductor chips. Some have come up with workarounds, such as deleting some features to give priority to vehicles that need more of these chips, and more chip producers have emerged while those that already exist have promised bigger volumes in 2022.

Hyundai, which has more successfully managed the shortage than most, now has a viable solution and will partner with neighboring South Korean firm and tech behemoth Samsung to quickly restore chip caches.

The two largest conglomerates in South Korea, Samsung Electronics and Hyundai Motor, have been urged to work together more closely. It would be excellent if Samsung and Hyundai Motor had better business links in the automotive and semiconductor sectors, he said to the leaders of the two firms on Monday.

When Korea JoongAng Daily contacted both, a Hyundai representative responded with the standard “There’s nothing we can say about the deal.” The spokesperson continued, “Even if there was, we can’t tell given the mission of keeping it quiet.” Surely, if there were no contract to speak of, it could be rejected flatly.

Hyundai already receives memory chips from Samsung that are utilized in the infotainment interfaces, among other components, of vehicles like the Ioniq 5, but the company currently buys its semiconductors from NXP, Infineon, and Renesas.

However, Samsung announced earlier this year that it would make significant investments in the production of car chips. Samsung previously declared in May that it would invest the equivalent of $144 billion in the development of “non-memory semiconductors” by 2030. Automobiles, computer CPUs, smartphone chips, and camera sensors are all examples of non-memory chips.

We’ll monitor developments between the two businesses, but as of right now, nothing seems to be moving in the right direction.