Localization of Automotive Chips
About 800 to 1,000 semiconductor chips, including the one folds and unfolds side-view mirrors and for vehicle communication and multimedia processing, are being used to manufacture the latest car models. Ushering in the era of smart car, the demand of semiconductor chips will be on the rise.
Accordingly, domestic companies are seeking to domestically produce automotive semiconductors, which have been imported, in earnest. They aim to cut down their dependence on imports from the U.S., Japan and Europe, which reach over 90 percent, and expand the base in the global automotive semiconductor market, which is expected to surpass US$30 billion (37 trillion won) this year and US$40 billion (49.32 trillion won) in 2021.
According to industry sources on Feb. 21, a domestic fabless semiconductor business IK Semicon Co. has recently started supplying an integrated circuit (IC), which controls car engines, to GM Korea and Hyundai Motor Group.
Silicon Works, which was included to LG Group’s affiliate, has begun the mass production of car sensors in 2014, and is supplying it to automakers at home and abroad. The company also aims to foster automotive semiconductors as its new growth engine, and turn over 10 percent of the total sales of 1 trillion won (US$811.03 million) in 2018 in the automotive chip sector. In addition, IA, which is led by Kim Dong-jin, former vice chairman of Hyundai Mobis, has designed automotive chips and is supplying them to Hyundai Motor, seeking to generate 100 billion won (US$81.1 million) in sales this year. Dongbu HiTeck is also joining hands with domestic fabless businesses for automotive semiconductor foundries. An official from the industry said, “Hyundai Autron has also established a business division dedicated to semiconductor design. Conglomerates show growing interest in automotive chips.”
According to the data from market research firm IHS, the global automotive semiconductor market is expected to grow to US$30 billion (37 trillion won) this year and US$40 billion (49.32 trillion won) in 2021. However, domestic firms failed to stand out in the automotive semiconductor market. This was largely due to the fact that they had difficulties to push into the market, in which requires strict creditability and consumers don’t change their suppliers for a long time once supply contracts are signed. Automotive semiconductor chips run credibility tests for more than a year and a half to prove a longer life cycle than home and industrial semiconductors and a zero failure rate even under diverse environmental conditions. An official from the industry said, “Until now, the dependence rate of domestic firms on foreign companies, such as NXP Semiconductors, Infineon Technologies and Renesas Technology, stood at over 90 percent.”
Domestic car chip producers, which have just started seeking to localization, face innumerable problems. Many say that domestic automotive semiconductor companies are unable to compete with global companies since they are small in size and has short history.
Experts say that conglomerates, which show interest in automotive semiconductor chips such as Samsung Electronics, Hyundai Motor, LG Electronics and SK Hynix, should strengthen the cooperation with small and mid-size semiconductor producers and activate the domestic car chip ecosystem further.