Hyundai Motor to outsource auto semiconductor production

Hyundai Motor Group has taken the initiative in making semiconductors (integrated circuits) for vehicles in Korea to replace imports by deciding to outsource chip production to Samsung Electronics and Hynix Semiconductor.

Hyundai`s automotive semiconductors used to be developed by Hyundai Autron, a new vehicle semiconductor maker, but the latter will now focus on “customized design” while increasing efficiency by outsourcing production.

Hyundai Motor Group Vice Chairman Yang Woong-chul, in charge of R&D for Hyundai Motor and Kia Motors, told The Dong-A Ilbo at the event "2012 Auto China" in Beijing on Monday, “Since semiconductors for cars are directly related to life, they require high credibility unlike semiconductors for IT,” adding, “Korea is a leading chipmaker in the world but since it has focused on IT, it shows a weakness in semiconductors for vehicles. That’s why we decided to design them on our own.”

Hyundai Motor Group will design automotive semiconductors by itself but has decided to outsource their production. The conglomerate can focus on R&D without making a huge capex investment for semiconductors. This is what Apple does. Apple designed the iPhone but outsourced production to Taiwan’s Foxconn.

“In Korea, Samsung Electronics and Hynix are highly interested in automotive semiconductors,” Yang said, adding, “Foreign companies such as Infineon and Freescale are competitive in production and they can be our options, too.”

The group has imported semiconductors from foreign companies including Infineon. The industry estimates that Hyundai Motor Group has a budget of 2 trillion won (1.75 billion U.S. dollars) per year for the purchase of automotive semiconductors. Korean automakers import 98.4 percent of such chips from outside the country.

“If we assemble existing products (designed by chipmakers), efficiency will go down and it could impact the credibility of our products,” Yang said, adding, “Our ultimate goal is to have all electronic technologies related to automobiles.”

“Hyundai Motor Company has accumulated years of technological know-how in the automotive semiconductor sector through its partnership with Infineon. We successfully used them for headlight control systems, and are in process of developing dozens of semiconductors.”

gene@donga.com