Samsung Electronics Vice Chairman Lee Jae-yong, left, shakes hands with Hyundai Motor Group Chairman Chung Euisun at an event at the Korea Federation of SMEs in Yeouido, western Seoul, in this file photo. Korea Times file

By Kim Yoo-chul

The global automotive industry has been slowed down due to the grave scarcity of semiconductors since the beginning of the COVID-19 pandemic, with many major vehicle manufacturers halting their assembly lines.

This growing challenge in the global automotive industry has struck fiercely at the backbone industries of the United States, the world's largest economy, from automobiles to smartphones. This issue pushed U.S. President Joe Biden and members of Congress to make collective efforts with leading allied countries in order to address supply bottlenecks, enabling an expanded role for Korea, given the country's long-time leadership in the memory chip sector.

Because semiconductors, vaccines and batteries ― all areas in which Korea holds a competitive advantage ― are increasingly being viewed as matters of national security, the Korean government is hoping top-tier homegrown technology companies will work together to level up the commitments, despite their history of competition with each other in many ways, in order to strengthen the country's overall resilience.

In a rare request, President Moon Jae-in told the chiefs of Samsung and Hyundai Motor of the necessity for mutual collaboration in the field of automotive semiconductors. Moon's proposal came during his meeting with the chiefs of the country's leading conglomerates at Cheong Wa Dae, Monday. President Moon previously indicated that logic chips, the hydrogen-related value chain, electric vehicles and OLEDs were some of Korea's future growth engines.

Interestingly, upon the request of the President, the two companies were ready to respond.

Historically, the relationship between Samsung and Hyundai has been stagnant based on Samsung's failed attempts to advance into the car industry, dissatisfying the latter, as the country's top automotive company. Despite Samsung's repeated denials that it has no plans to reenter the car industry, earlier thoughts were that Hyundai was maintaining a rather defensive stance before Samsung, as the legacy thinking by senior Hyundai management was that Samsung was a company that has actually tried to threaten its primary business.

But opportunities for collaboration have recently improved, with Hyundai Motor Chairman Chung Euisun visiting Samsung's local battery plant, and with Samsung leader Lee Jae-yong speaking to Chung about key operational information at its battery business.

Industry officials and sources familiar with the issue said Tuesday that the top management at Samsung and Hyundai Motor is said to have asked the relevant business units to seek the best possible ways to level up their partnerships in the automotive semiconductors business. Representatives at the companies declined to comment.

But from a business standpoint, the most viable scenario is that Hyundai Motor may procure some custom telecommunication chips, infotainment processors and display driver chips ― the components that are considered vital for use in vehicles and classified as "system or logic chips," in which Samsung has a weakness, and thus has been prioritizing.

"Given Samsung's recent releases of Exynos-branded automotive and infotainment chips, if Hyundai Motor decides to use the Samsung products in its vehicles, then that will be very impressive, and this scenario is very plausible and does make sense," said a senior executive at a local automotive firm by telephone, Tuesday.

Simply, Samsung's wish is to test the compatibility and affordability of its logic-based automotive semiconductors by supplying them to trusted automakers. From that viewpoint, Hyundai is the right option. For Hyundai Motor's position, if it increases its procurement of Samsung chips, then that will help it save costs and launch joint marketing.

As a long-term plan, while it's too early to say if Samsung will provide its foundry service to Hyundai Motor by manufacturing Hyundai-designed automotive chips at Samsung's local semiconductor plants, this is the scenario that Samsung wants, said officials. Driverless cars with Level-3 technology require more than 2,000 chips and this complexity has forced Hyundai Motor to explore possibilities for effectively bringing its chip production in-house via its affiliates.

"Well, from a supply chain standpoint, it's required for the two to have an expanded business partnership. Korea truly has a role in terms of contributing to an easing of supply bottlenecks," said the executive. Samsung aims to achieve the global top position in system semiconductors by 2030. It is trailing Taiwan's foundry king, TSMC, in foundry chips. But Samsung Electronics' global share in the foundry chip segment isn't currently comparable to that of the Taiwanese company.