Another car company announced that it will develop its own chips. Is self-development the best way to deal with shortages?

Recently, according to foreign media reports, in order to reduce its dependence on chip manufacturers, Hyundai Motor said it will plan to develop chips independently.

Hyundai Motor America's CEO said Hyundai Motor's production plan is close to its initial target in the fourth quarter and the worst of the chip shortage has passed. Hyundai Motor said it is seeking to develop its own chips, which will offset some of its losses in 2022.

The automotive market is full of issues

With the rapid development of automobile electrification and intelligence, the demand for chips is also growing.

Since the second half of 2020, chip shortages have become the norm, especially in the automotive industry. Many companies at home and abroad have reduced production or even stopped production many times.

This year, the shortage of automotive chips has been further exacerbated by factors such as the snowstorm in Texas, a semiconductor powerhouse in the United States, a fire at Japan's Renesas chip factory, and repeated outbreaks in Southeast Asia. The shortage of automotive chips and price increases have put automakers in a situation of being besieged on all sides.

Against this backdrop, more and more car companies are entering the race to develop and manufacture their own chips.

The "three candies" developed by car companies

The shortage of automotive chips, coupled with Tesla's chip freedom, has sparked a frenzy among car companies to develop their own chips. There are three benefits to developing their own chips.

Stability: We have taken the initiative in chips, reduced our reliance on suppliers, and are no longer stuck in the bottleneck, so we can keep our production capacity firmly in our hands;

Low price: With the advent of the software-defined car era, semiconductors in smart cars account for about 35% of the total vehicle cost. The sharp price increase after the chip shortage is too heavy a burden for car companies, who generally cannot buy chips or cannot afford them. Self-developed chips can increase control over the cost of the entire vehicle;

Suitable for: Vehicle manufacturers have the best understanding of their own vehicles. Self-developed chips can ensure a higher degree of adaptability and tailor-make customized products that best suit their needs.

Is self-research the “optimal solution” to deal with shortages?

The benefits of self-developed chips are unquestionable, but the road to self-development is extremely difficult.

The automotive chip industry has high investment, high risk, and higher barriers. Although the automotive industry is closely related to the chip industry, each industry has its own specialization. Most car companies previously only did traditional design and had no relevant foundation for chip research and development. Without large capital investment, a professional team, and long-term research and development testing, it is difficult to achieve self-developed chips.

Even Tesla only had the confidence to develop its own self-driving chips after recruiting Silicon Valley chip legend Jim Keller.

It is unlikely that self-developed products by car companies will become the "optimal solution" to deal with chip shortages.

However, currently, automakers are trying to find solutions, develop their own chips, and change the way they manage their supply chains. The government is also providing strong support.

Domestically, since the beginning of this year, the Ministry of Industry and Information Technology has organized the compilation of the "Automotive Semiconductor Supply and Demand Matching Manual" to further clear the supply and demand information channels between automobile companies and chip companies, and build a communication and cooperation platform for both parties; and encourage the role of the China Automotive Chip Industry Innovation Strategic Alliance to promote cooperation between companies and promote the gradual resolution of the automotive chip shortage problem.