The global economy is now likely to bounce back to the pre-pandemic level as more and more people are vaccinated, but various industry sectors, including electronics and cars, are grappling with semiconductor shortages and supply chain deterioration.
The shortages come as chip makers have given priority to chips for IT devices and home appliances, which have been in robust demand during the COVID-19 pandemic. The chip supply chain began to show its vulnerability as chip makers have been hit hard by heavy weather and natural disasters.
Samsung Electronics, NXP and Infineon had to shut down their contract-based chip-making factories in Texas in February due to power outages after an unprecedented winter storm. Samsung is the world’s largest memory chip maker and the second-largest foundry company while NXP and Infineon are leading automotive chipmakers.
An earthquake in Japan last month has worsened the chip shortages. No. 3 automotive chip maker Renesas Electronics also shut down its factory for two days in February after the 7.3-maginitude earthquake hit the country. Also, Taiwan’s Unimicron saw production disruptions to its manufacture of printed circuit boards, which are used for various electronics devices, after a fire broke out in its plant in February.
For chip makers, the chip shortage issue will become a favorable factor to boost their performances as the average selling price of chips is soaring, but the shortages have taken a heavy toll on other industries.
As seen in the automotive business, the chip shortage issue could negatively affect the mobile device business as well.
Samsung’s mobile chief Koh Dong-jin said that that the world’s largest smartphone maker may not release its latest Galaxy Note smartphone due to the prolonging chip shortage.
During a meeting with shareholders on March 17, Koh said there is a “serious imbalance between semiconductor supply and demand.” As a result, Samsung may postpone the release of this year’s Note smartphone, which the company has regularly launched in the second half of the year.
The mobile chief said the imbalance between supply and demand for chips could be increased in the second quarter of this year, but the company is doing its best to avoid production disruptions.
“I cannot say we have solved this problem 100 percent at this moment,” he said. “We could face issues in the second quarter, but everyone is working hard to solve the problem.”
Kim Yang-paeng, a researcher at the Korea Institute for Industrial Economics and Trade, said the chip shortage issue has made chip component makers raise the price of their products and this will consequently hurt the profitability of companies providing finished goods.
“Finished goods companies are purchasing more chips to increase their chip inventory level due to rising semiconductor prices,” the researcher said.
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| Samsung Electronics’ Austin branch in Texas / Captured from Samsung Electronics webpage |
The automotive industry was hit first by the chip shortage issue as global carmakers had to delay their production schedules.
Hyundai Motor and Kia could evade the negative impact, as the Korean government’s agile response to control the virus spread has helped the economy keep running. Thanks to the efforts, the two Korean automotive powerhouses could minimize the shutdown time of their facilities and didn’t reduce automotive chip orders.
Though they said they have secured sufficient chips for the first quarter, the two companies decided to reduce weekend and holiday operations through March as there were no signs on improvement in the chip shortage issue.
In response to the persisting chip shortage, companies in the semiconductor and automotive industries are putting their heads together and devising ways to cooperate with each other.
On March 17, the Korea Automobile Manufacturers Association (KAMA) and the Korea Semiconductor Industry Association signed a memorandum of understanding to strengthen technological exchanges. The two industry lobbies said the meeting was held to respond to various problems caused by chip supply shortage.
Under the agreement, the two lobbies will cooperate on expanding the production base of automotive chips and co-developing related technologies. “More than 2,000 to 3,000 automotive chips will be used for each vehicle in the era of autonomous driving. It is urgent to improve technological capabilities of domestic fabless companies as carmakers here have high dependency on overseas chip companies,” KAMA Chairman Chung Man-ki said.
Stating that the automotive chip shortage issue cannot be resolved in a short time, Trade, Industry and Energy Vice Minister Park Jin-kyu also vowed to provide governmental support to foster the domestic automotive chip industry.
