[Car Semiconductor Supply Shortage] Prevent the 'Second Wiring Harness' Crisis... Emergency Measures Discussed

Domestic OEMs Use Only 2.2% of Korean Fabless Automotive Semiconductors... High Dependence on Overseas Sources
Three Solutions Proposed: Discover Domestic Alternative Suppliers and Link Production, Supplement and Expand Domestic Foundry Production Facilities

[Asia Economy Reporter Kim Hyewon] As the global automotive industry, including South Korea, faces a shutdown crisis due to a shortage of automotive semiconductors, the public and private sectors have urgently prepared countermeasures to prevent a 'second wiring harness' incident.

According to the industry on the 25th, the Korea Automobile Manufacturers Association held a discussion on minimizing disruptions in the supply of automotive semiconductors on the 22nd, together with the Korea Semiconductor Industry Association and the System Semiconductor Forum. About 10 representatives from finished car and parts companies such as Hyundai Motor, Ssangyong Motor, and Mando, as well as fabless (semiconductor design specialized) companies like Telechips and Nextchip, attended the meeting.

Automotive semiconductors are produced through fabless and foundry (contract manufacturing) companies and delivered to finished cars as modular electronic components via first-tier suppliers such as Hyundai Mobis and Mando. It is known that about 400 types of automotive semiconductors are required to manufacture one vehicle. Overseas, production cuts have already become a reality due to failures in adjusting the supply of automotive semiconductors, and domestically, the inventory of automotive semiconductors is running low, starting with the withdrawal of overtime work at Korea GM this month.

The industry attributes the difficulties domestic companies face in adjusting automotive semiconductor supply to an excessive preference for overseas companies. According to the Automobile Industry Association, the usage rate of automotive semiconductors developed by domestic fabless companies by our OEMs is only 2.2%. This is because domestic finished car manufacturers mainly receive automotive semiconductors from overseas companies such as Infineon (Germany), NXP (Netherlands), and STMicroelectronics (Switzerland). Considering vehicle safety and delivery prices, these companies have no choice but to continue transactions with overseas companies with whom they have long-term collaborations. Another issue is the lack of production linkage between domestic fabless and foundry companies for automotive semiconductors.

At the emergency countermeasure meeting, three major alternatives were proposed: ▲discovering domestic alternative suppliers ▲securing additional domestic foundry production facilities ▲linking overseas fabless companies with domestic foundry production.

First, it involves discovering alternative suppliers domestically rather than overseas so that domestic finished car manufacturers can utilize more products from domestic fabless companies with automotive semiconductor design capabilities. This resembles the case where Japan’s sudden export restrictions led to an increase in the localization ratio of materials, parts, and equipment, which was a vulnerable area for us. The automobile and semiconductor associations plan to support big data on the automotive semiconductor supply structure, company status, and key items.

There are also calls for supplementing and expanding production facilities of leading domestic foundry companies such as Samsung Electronics and DB HiTek. Currently, automotive semiconductors mainly use 8-inch wafer foundries, which are advantageous for small-volume, multi-product production, but ultimately, a transition to 12-inch wafers and achieving economies of scale are necessary.

Additionally, there were voices advocating the use of inter-country cooperation channels to have overseas fabless companies entrust production not to Taiwan’s TSMC or the US’s GlobalFoundries but to domestic foundry companies. A representative from the Automobile Industry Association pointed out, "Research and development (R&D) or tax support is needed when developing automotive semiconductors or investing in production facilities through linkage between the automotive and semiconductor industries."