Hyundai actively stockpiled chips prior to shortage

The global semiconductor chip shortage has certainly left its mark on several carmakers, with many forced to reduce vehicle production due to lack of parts supply. However, Hyundai Motor Group and its subsidiaries are not affected by this issue, as the company actively stockpiled chip last year, just as other carmakers reduced orders for chips due to low car demand in 2020.

According to a report by Reuters, the Korean company even accelerated its chip purchases towards the end of last year. “Like other automakers, Hyundai also planned to cut production at the beginning of the year because of Covid-19. But procurement read the trend of the semiconductor industry cutting auto chips production and said, ‘if we don’t buy them as well, we’ll be in trouble later on,’” said a source familiar with the matter.

Analysts reasoned that Hyundai Motor Group’s decision to stockpile chips was due to the South Korean market remaining relatively strong throughout the pandemic in 2020. The anticipatory move also allowed it to keep costs down before the shortage worsened. It also helped that the company has more local suppliers compared to rivals, including Telechips, which contracts fabrication out to Samsung Electronics, that are likely to prioritise Hyundai.

Even with a greater reserve of chips, supply is still finite, and the company has previously said during a recent earnings call that it couldn’t confirm if it was prepared for the next three to six months, but for now, it is “not seeing any immediate production disruption.”

Adjustments to production have been made to control chip usage, with weaker-selling models like the Sonata being less of a priority compared to the more popular Grandeur. More frequent inventory checks are also being conducted to ensure sufficient chip supply, and the company is trying to lock down supply contracts earlier as well.

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