Global Auto Companies Domino Shutdown Amid 'Semiconductor Supply Shortage'

Hyundai Motor and Kia Also Face Consecutive Shutdowns and Overtime Cancellations

Governments around the world, including South Korea, the United States, Japan, and Europe, are busily responding to the semiconductor supply shortage, but the shutdowns of global automakers are spreading like dominoes. The industry is concerned that, since there is no effective way to increase the production of automotive semiconductors, production stoppages and resumptions may continue to repeat depending on the semiconductor supply situation until the end of this year.

According to the Wall Street Journal (WSJ) on the 9th, General Motors (GM) has decided to extend the production halt at its plants in Kansas, USA, and Ontario, Canada, until the 10th of next month. Previously, GM had stopped operations at these two plants in February. In addition, GM plans to halt or reduce production at three other plants located in Tennessee and Michigan, USA. These plants produce popular Chevrolet and Cadillac sport utility vehicle (SUV) models. GM had been coping with the semiconductor shortage by reallocating semiconductors from less popular models to popular ones, but as the shortage of automotive semiconductors has prolonged, this strategy is proving insufficient.

Ford has also decided to suspend operations at its plants in Illinois and Missouri, USA, until next week due to the semiconductor shortage. As a result, models such as the Ford Explorer, Mustang, and Lincoln Aviator are expected to be affected. Ford anticipates that production disruptions caused by the semiconductor shortage will reduce its profits by $1 billion (approximately 1.1 trillion KRW) this year.

As production disruptions due to the semiconductor shortage worsen uncontrollably, the scale of damage is also expanding. The Alliance for Automotive Innovation (AAI), a U.S. automotive manufacturers' group, forecasts that U.S. vehicle production could decrease by 1.28 million units this year.

Japanese and European automakers are also experiencing production disruptions caused by semiconductor shortages. In the Japanese automotive industry, the third-largest automotive semiconductor manufacturer, Renesas Semiconductor, suffered a fire on the 19th of last month, directly impacting production. This has further disrupted already insufficient semiconductor production. Citibank and Nomura Securities predict that the fire will reduce the production volume of Japanese automakers such as Toyota and Honda by approximately 1.8 to 2.4 million units in the second quarter.

South Korea's automakers are no exception. Hyundai Motor Company plans to halt operations at its Ulsan Plant 1, which produces the Ioniq 5 and Kona, until the 14th, and is also considering a shutdown at its Asan Plant, which produces the best-selling Grandeur model. Kia has canceled all planned overtime this month at its Gwangju Plant 1 and Hwaseong Plant. Additionally, Korea GM has been reducing production by 50% at its Bupyeong Plant 2, which produces the Malibu and Trax, since February, and SsangYong Motor has suspended operations at its Pyeongtaek Plant from the day before yesterday until the 16th.

The problem is that temporary shutdowns cannot resolve the automotive semiconductor shortage. Due to the characteristics of the automotive semiconductor market, which has high technical requirements but low profitability, existing semiconductor companies have little incentive to enter the business. Even if foundries expand production, it requires trillion-won-level investments and 2 to 3 years to complete. Accordingly, consulting firm AlixPartners forecasts that global automotive industry sales will decrease by approximately $60.6 billion (about 69 trillion KRW) this year due to semiconductor shortages.

An industry insider said, "We have been taking desperate measures such as using semiconductors with less supply difficulty to prepare substitutes, but these are only temporary solutions and may worsen profitability," adding, "The situation is expected to stabilize somewhat in the second half of the year, but it will take more time to return to full normalcy."

This content was produced with the assistance of AI translation services.