Hyundai Motor plans to develop its own chips

Hyundai Motor is the latest automaker to announce plans to develop its own semiconductor chips in order to reduce reliance on chipmakers, according to the company's global chief operating officer, José Munoz.

As car sales fell during the pandemic, automakers paused their orders just as electronics manufacturers began ramping up production, and snapping up the existing supply of chips, to meet the raised demand in laptops and gaming consoles. When consumers started buying vehicles again, automakers were met with a global semiconductor shortage that has led to most OEMs — apart from Tesla and Toyota — idling production lines that caused a dip in car sales. As most OEMs also came out with aggressive plans to go electric, the need for chips has never been stronger. Aside from Hyundai, Tesla and General Motors have announced plans to produce their own chips and cut out the middle man.

While Hyundai's sales this past quarter didn't suffer too much, Munoz did say the "toughest months" were August and September, according to Reuters. The South Korean automaker had to temporarily shut down some factories this year, but Munoz said the worst had passed for the chip shortage, citing Intel's massive investments to expand capacity.

Nonetheless, Munoz told reporters Hyundai doesn't want to get caught without a supply again and needs to be more self-reliant in the space. He acknowledged that developing chips in-house would take a lot of time and investment, but that it's "something we're working on," most likely in conjunction with Hyundai Mobis, the company's parts affiliate.

"The ability to secure supply may be a distinguishing feature of the successful OEMs that survive the industry shakeup and consolidation," Bob Leigh, senior market development director of commercial markets at Real-Time Innovations, a software framing company, told TechCrunch. "It is more likely that OEMs will acquire and/or partner with the firms that can secure the supply. But, this shortage will drive the industry to adopt new chip technologies that are more economical to produce. The chip makers don't want to make the legacy chips that automakers want."

Leigh also said that although many automakers will probably move in the same direction of trying to own their own chip development, it's not necessarily feasible because they don't have the expertise and he doesn't think it will scale.

Even without its proprietary supply, Hyundai Motor is still on track to manufacture electric vehicles in the U.S. next year with potential plans to enhance its Alabama factory and increase production capacity, said Munoz. The COO, who is also president of Hyundai Motor North America, encouraged the U.S. government to extend proposed $4,500 EV tax credit incentives to vehicles made at non-union factories, as well as union ones. Aside from Hyundai's U.S. factories, Rivian, Tesla and Toyota factories are not unionized.