Report: Korea reaches out to auto chipmakers to increase supply

06 May 2021

The government of South Korea in April sent an official letter to four automotive semiconductor companies to increase their supply of automotive chips to help with the ongoing shortage impacting the industry.

The automotive market has been especially hit hard by the chip supply chain shortage. This has caused many automotive OEMs to forecast a reduction in earnings for the year to the tune to $1 billion to $2.5 billion and nearly all OEMs have had to cut production on vehicles.

According to News1 Korea, one of the confirmed companies the Korean government reached out to was NXP Semiconductors, one of the leading automotive chip firms globally. It is said to be the first time the Korean Ministry of Trade, Industry and Energy has reached out to an automotive chip company directly.

NXP is a long-time customer of Taiwan Semiconductor Manufacturing Co. (TSMC), the largest foundry in the world with more than half of the foundry market share. So presumably this would allow TSMC to generate more automotive chips to help with the shortage.

Many companies now believe the ongoing chip shortage may last for several years and the crisis has caught the attention of the Biden Administration, which began pushing for solutions, first in the form of an executive order to investigate the issue and how to solve it. Later, as part of a $2 trillion-plus infrastructure program, Biden pledged to spend some $50 billion to be allocated to semiconductor manufacturing and R&D.

While more fabs are currently under construction to help with ongoing chip demand, which is not expected to slow down but instead grow 5% in the next decade, this will not help the current shortage as this takes time and investment. One of the ways that could help would be to accelerate production of automotive chips at foundries such as TSMC, which is a major manufacturer of microcontrollers and various other electronics systems for cars.

As the U.S. is looking to expand domestic semiconductor manufacturing, the European Union is seeking to expand its own home-grown capacity, aiming for 20% of the world’s chips to be manufactured locally by 2030. However, Taiwan and Korea have taken notice and are equally upping its investment to remain in a dominant position globally, offering tax deductions and incentives to expand the supply chain.

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