Car Semiconductor Shortage Crisis... "Korean Government Should Request Taiwan's Cooperation for Increased Production"

[Asia Economy Reporter Kim Hyewon] In response to the global shortage crisis of automotive semiconductors, there are calls for the Korean government to step in and request production increase cooperation from major producing countries. The industry views the current instability in automotive semiconductor supply as an urgent crisis that requires the government to mobilize diplomatic efforts to secure short-term supply beyond the private sector.

The Korea Automobile Manufacturers Association (KAMA) stated in its report titled "Disruption and Response to Automotive Semiconductor Supply" on the 10th, "To minimize the impact of supply disruptions on the domestic automobile industry, it is necessary for the government to first request production increase cooperation for automotive semiconductors from major producing countries (Taiwan TSMC) to secure short-term supply." This is because discovering new foundry companies requires long-term verification, making the expansion of production volume at existing foundries urgent. Production through alternative foundries takes at least one year or more due to semiconductor redesign for factory adaptation and prototype safety verification.

Currently, major automobile producing countries such as the United States (State Department), Germany (Ministry of Economic Affairs), and Japan (Ministry of Foreign Affairs) have requested cooperation from the Taiwanese government to increase automotive semiconductor production. It is reported that the Korean government is also aware of the seriousness of the automotive semiconductor supply shortage and is reviewing intergovernmental consultations.

The disruption in automotive semiconductor supply has actually entered a prolonged phase. According to IHS Markit, the supply disruption of automotive semiconductors is estimated to affect 670,000 vehicles in the first quarter of this year alone. In China, foreign companies such as Volkswagen and Honda have halted factory operations for 5 to 14 days, resulting in an expected disruption of 250,000 vehicles. Considering that the lead time (time from order to delivery) for the most critical component, the microcontroller unit (MCU), is 26 to 38 weeks, supply instability is expected to continue at least until the third quarter. The MCU is a vehicle power control system semiconductor for which Taiwan's TSMC holds 70% of the global supply.

Domestically, Hyundai Motor and Kia have suppliers who have pre-stocked inventory, so there are no immediate production disruptions, but the inventory is known to last only 1 to 2 months. Korea GM has been increasingly affected by the shortage of automotive semiconductors, starting with canceled overtime in January and production cuts at the Bupyeong 2 plant this month. Overseas, GM has extended production cuts at three assembly plants in North America at least until mid-March. Besides GM, major automakers including Toyota, Volkswagen, Stellantis, Ford, Renault, Subaru, Nissan, Honda, and Mazda are all experiencing production disruptions due to the automotive semiconductor shortage.

KAMA advised that to prepare for prolonged supply disruptions, it is also necessary to secure alternative production capacity through domestic foundry companies such as Samsung Electronics and DB HiTek. However, since automotive semiconductors are not the main production items of domestic foundries, the industry insists that new government investment incentives or tax support are essential.

Jung Manki, Chairman of KAMA, said, "In a situation where the crisis caused by COVID-19 has not been completely resolved, the disruption in automotive semiconductor supply could spread the crisis to parts of our automobile industry." Chairman Jung emphasized, "In the short term, government-level international cooperation efforts such as requesting production increases from TSMC and others through the Taiwanese government are necessary, but in the long term, a cooperative network between the domestic automobile industry, fabless, and foundry industries should be established to expand domestic automotive semiconductor development and production capabilities."