[Car Talk Forest] Semiconductor Supply Shortage and Cold Wave... Concerns in the Global Automobile Market

Temporary Shutdown of Mexican Auto Plants Due to US Cold Wave Amid Vehicle Semiconductor Supply Shortage

[Asia Economy Reporter Changhwan Lee] The automotive industry is currently facing significant difficulties. The shortage of automotive semiconductors has hindered proper production, and the situation has worsened due to a cold wave in the United States.

Semiconductors are widely used not only in electronic devices such as smartphones and computers but also in automobiles. Conventional internal combustion engine vehicles we drive contain at least 300 to 400 semiconductors, while electric vehicles and autonomous vehicles use more than 2,000.

With the spread of electric vehicles and the rapid electrification of automobiles, the demand for automotive semiconductors has greatly increased. It is expected that as autonomous driving technology advances, the use of automotive semiconductors will expand even further. Cars are no longer just simple machines but have become IT devices.

However, companies that manufacture automotive semiconductors are limited. The market is dominated by NXP from the Netherlands, Infineon from Germany, STMicroelectronics from Switzerland, and Renesas from Japan.

Last year, when the COVID-19 pandemic caused a decline in automobile demand, these companies adjusted production by converting automotive semiconductor production lines to semiconductor lines for IT devices. However, as the spread of COVID-19 slowed and consumption rapidly recovered, automobile demand increased, leading to a shortage of automotive semiconductors.

Due to the difficulty in semiconductor supply, many global automakers such as GM, Ford, Volkswagen, and Toyota have been reducing production volumes. Korea GM has cut production at its Bupyeong Plant 2 by about half. Hyundai Motor and Kia reportedly have semiconductor inventory secured last year, so there is no immediate problem for the next month or two. However, if the situation prolongs, damage is considered inevitable.

Related industries expect the semiconductor shortage to continue long-term. Recently, the cold wave in the United States has increased the likelihood of worsening supply difficulties. The cold wave caused semiconductor factories of NXP, Infineon, and Samsung Electronics located in Austin, Texas, to halt operations. The supply of semiconductors produced at these factories stopped, worsening the already tight automotive semiconductor shortage.

The cold wave in the southern United States also affected Mexico. Due to insufficient supply of U.S. natural gas caused by the cold wave, many automobile factories in Mexico have shut down.

Factories of Kia, GM, and Volkswagen in Mexico temporarily shut down recently due to power shortages. The difficulties are intensifying as production cuts continue due to automotive semiconductor supply shortages, compounded by energy supply issues in North America. This year, automobile production is expected to decline more than anticipated, and companies’ profits are also expected to fall short of expectations.