GM Korea to Cut Vehicle Output
GM Korea will stop workers’ overtime on the weekend. This is not due to a labor-management conflict, a drop in sales or the spread of COVID-19. The culprit is a nail-sized automobile semiconductor.
A significant shortage of semiconductors for cars is unprecedentedly halting or delaying car production. Global semiconductor companies delayed production of semiconductors for vehicles as they gave priority to semiconductors for home appliances and information technology (IT) products, which have been in high demand since the outbreak of COVID-19.
GM Korea has canceled the overtime scheduled for Jan. 23 at its Bupyeong plant. "We are facing a shortage of semiconductors for some vehicles supplied by General Motors (GM) in the United States," a GM Korea official said. "We plan to cut vehicle production by suspending overtime and extra work for the time being."
GM Korea has not been receiving an enough amount of semiconductors for electronic control units (ECUs) and infotainment systems. It was the first time that a carmaker in Korea cuts production due to a shortage of semiconductors.
About 200 to 400 semiconductors are needed to produce a car in general. Semiconductors are needed for car components from ECUs that control automotive engines and transmissions to sensors that detect temperature and humidity. Chips go into nearly all parts including front and rear cameras, advanced driver assistance systems (ADASs), infotainment systems, steering wheels, and side mirrors.
Most of the global automotive semiconductor companies such as NXP in the Netherlands, Infineon in Germany, and Renesas in Japan are fabless companies that do not have production facilities. They entrust chip production to TSMC, Samsung Electronics, and UMC among others.
In 2020, demand for home appliances and smartphones spiked as non-face-to-face culture expanded due to the spread of the COVID-19 virus. As a result, production of relatively inexpensive vehicle chips has been pushed back as semiconductor orders have flooded foundry companies. In addition, vehicle sales recovered to an annual level in the second half of 2020, which led to a severe shortage of semiconductors for vehicles.
Global carmakers such as Germany’s Volkswagen, Japan's Toyota and the U.S. Ford have already started to cut production due to a lack of semiconductors. Ford and Fiat Chrysler decided to stop certain factories for a long time, and Audi put more than 10,000 employees on leave.
Semiconductor shortages have been considered news that can happen in overseas countries. It is because Korean carmakers have secured relatively ample inventory and expect to receive chips first from domestic chipmakers. However, as GM Korea has begun to adjust production volume, concerns have been growing that operations of domestic automobile factories may be disrupted soon. Other carmakers such as Hyundai Motor and Kia Corp. are reportedly securing the amount of semiconductors that they can us for one month.
Production of semiconductors for vehicles is not the main business of South Korean foundry companies such as Samsung Electronics and DB HiTek. Also Korean fabless companies in charge of design are concentrating their capabilities on other fields. "It is necessary to reduce dependence on foreign semiconductors for vehicles by enhancing the technical skills of Korean chipmakers," said an official of the Korean semiconductor industry.
Automotive semiconductors, graphics processing units (GPUs), display driver ICs (DDIs), and power semiconductors are in supply due to a lack of foundry services versus global demand, said Doh Hyun-woo, a researcher at NH Investment & Securities.
"The three major memory companies’ expansion of DRAM production capacities is limited compared to increasing demand," Doh said with respect to supply of memory semiconductors which had been in relatively stable supply,
Investment in new NAND flash production capabilities in 2021 will also fall short of market expectations, Doh predicted. “Chipmakers will need time in strengthening profitability-oriented management and improving yields of 176-layer 3D NAND flash production compared to the past," Doh said. "Through this, fixed trading prices of NAND flashes will rise starting from the third quarter."