Will Hyundai and Kia be okay… “Semiconductor stock 2-3 months”

The shock wave of the shortage of semiconductors is hitting the automobile industry. The unprecedented thing in history of shutting down factories due to lack of semiconductors happened. GM Korea, which said it had no effect in the middle of last month, cuts the operation of its 2 plant in Bupyeong by half.

Hyundai Motor Company and Kia are also in the position of securing inventory, but it is only a matter of time before the shortage of semiconductors spreads to Korea. The supply and demand situation is not expected to be easily resolved. There are observations that mid- to long-term effects are inevitable.

According to industry sources on the 5th, General Motors of the United States (GM) announced that it will completely stop production at its factories in Fairfax, Kansas, and Ingersoll, Ontario, Canada from the 8th.

In the case of the 2nd plant in Bupyeong, a production cut was planned. By cutting the operation in half, the number of production units is expected to rise from 10,000 units per month to 5,000 units.

This is where the sedan Malibu and Trax are produced. As of last year, about 80,000 units of Trax were exported, and some setbacks are expected to be inevitable in this crisis.

The company said, “We are looking for a way to supply and demand semiconductors,” and said, “We are focusing all our capabilities on continuing to produce sports utility vehicles (SUVs) that are in high demand.”

GM Korea is planning to operate the production plan of Bupyeong Plant 2 on a weekly basis, reflecting that the semiconductor supply situation is flexible.

Hyundai Motor Company and Kia have not yet been affected by production disruptions caused by semiconductor shortages. Hyundai Motor’s position is that “the factory will not stop right away by taking measures such as securing stock.”

Kia also mentioned in the earnings conference call at the end of last month, “I started to check and intensively manage the supply system from October last year,” and said, “It is difficult to reveal specific figures such as several months’ worth.” The industry estimates that “the two companies have accumulated 2 to 3 months of inventory together with the affiliate Hyundai Mobis.”

However, the semiconductor supply turmoil is entering a prolonged phase. As a result, there are concerns that domestic companies may also be hit.

Market research firm IHS Markit predicted in a recent report that “semiconductor shortages will continue until the third quarter (July to September).” It also analyzed that “the production of global automakers is expected to decrease by 672,000 units in the first quarter (January to March).”

When the car was not sold due to the corona, orders for semiconductors were reduced. At the same time, the demand for home appliances and PC peripherals exploded, and market unrest has increased.

Already, Audi, Volkswagen, Ford, Toyota, and FiatChrysler (FCA) are temporarily leaving their employees and controlling production.

The German government and industry have requested an increase in production from TSMC, the No. 1 semiconductor manufacturer, but it is unknown whether they will resolve it early. In the fourth quarter of last year (October-December), TSMC’s sales accounted for only 3.0% of semiconductors in cars.

This is because the production line expansion has been delayed due to relatively low profitability and different sizes and specifications. In addition, there has been a recent movement to raise prices.

IHS Markit’s report diagnosed that “the increasing supply and demand were at the same time occurring,” and “unless these two problems are controlled, it will be difficult to resolve the shortage of semiconductors.”

An official from an automaker said, “We are taking all measures, such as grasping the trend of demand,” and “it is urgent to come up with countermeasures at the government level as we cannot get out of the sphere of influence, even if not immediately.