Published in Transportation

Hyundai bought chips when others did not

by on26 February 2021

Thank goodness for crystal balls

Hyundai has so far avoided a chip shortage that has plagued global automakers, largely maintaining its stockpile of chips last year and even accelerating purchases towards the end, while their rivals did not.

Other than Japan’s Toyota, which said this month it had enough chip inventory to last it about four months, Hyundai and its sister firm Kia Corp are the only global automakers to have maintained a stockpile of low-tech chips that helped them keep up production.

The South Korean automaker kept buying chips even as rivals cut orders to reflect diminished demand because of the pandemic. 

“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 deep throat told Reuters.

Analysts said past events that roiled Hyundai’s supply chain and forced it to halt production have shaped this more conservative take on inventory, a departure from automakers’ typical just-in-time approach.

“Like other automakers, Hyundai also planned to cut production at the beginning of the year because of COVID-19,” said one of the people with direct knowledge of Hyundai’s purchases.

Hyundai still bought fewer chips in 2020 than it did in 2019. But it sharply increased buying in the quarter that ended in December, the person said.

Since Hyundai kept buying from chipmakers and global auto parts suppliers such as Bosch and Continental before the shortage worsened, they also managed to keep costs down.

“This has allowed Hyundai to first, secure auto chips, and second, buy them when they were cheaper,” said Kim Jin-woo, analyst at Korea Investment & Securities.

Hyundai has more local suppliers than rivals.

It can't last of course. If the chip shortage does not end soon Hyundai could suffer,


Last modified on 26 February 2021
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