Growing production of electric vehicles (EVs) in China has boosted demand for automotive chips, but domestic companies still rely on foreign suppliers for more than 90 percent of their needs, according to analysts and industry insiders.
Officials from the Ministry of Industry and Information Technology (MIIT) and the Development Research Center of the State Council have repeatedly emphasized China’s low self-sufficiency in automotive semiconductors. “Currently, the self-sufficiency rate of automotive chips in China is less than 10 percent,” according to Luo Daojun, deputy director of MIIT’s Institute of Components and Materials, who has been a keynote speaker at several industry conferences this year.
Wang Qing, deputy director of the Development Research Center, said at another conference last year that China’s dependence on foreign suppliers of automotive chips is as high as 95 percent. “For computer and control chips, the self-sufficiency rate is less than 1 percent, while for power and memory chips it is only 8 percent,” he said.
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China’s dependence on imported automotive chips has become a burning issue as Beijing seeks to take the lead in the global electric vehicle market amid heightened geopolitical tensions with the US. In May, Nikkei Asia reported that the Chinese government had called on the country’s automakers to source up to 25 percent of their chips from the country by 2025.
An employee inspects a silicon wafer at a plant in Binzhou, east China’s Shandong province. Photo: AFP alt=An employee inspects a silicon wafer at a plant in Binzhou, in the eastern Chinese province of Shandong. Photo: AFP>
The push comes amid explosive growth in electric vehicle production. In November, China produced 11.49 million electric vehicles for the year, up 37.5 percent year-on-year, data from the National Bureau of Statistics showed. Furthermore, electric vehicles accounted for 40.8 percent of all cars produced in the country.
The boom in electric vehicles has led to ever-increasing demand for semiconductors, as electric and smart vehicles require significantly more chips than traditional combustion engine cars. The China Association of Automobile Manufacturers (CAAM) said traditional cars typically need 600 to 700 chips per vehicle, while electric vehicles need about 1,600. Smart vehicles, equipped with more advanced features, require as many as 3,000 chips.
Increasing chip density also translates into higher semiconductor value per vehicle. He Hao, chairman of Seres Automobile, an automaker that works with Huawei Technologies, told an industry conference in June that chip costs as a percentage of total vehicle costs will rise from 4 percent in 2019 to 20 percent by 2030.
Despite Beijing’s efforts, China’s automotive sector is still far from achieving semiconductor independence. Global players such as Infineon Technologies, NXP Semiconductors, STMicroelectronics, Texas Instruments and Renesas Electronics continue to dominate the market.
Electric vehicles are being charged at a new charging and battery exchange station in Beijing. Photo: Xinhua alt=Electric cars are being charged at a new charging and battery replacement station in Beijing. Photo: Xinhua>
In the segment of advanced chips, such as intelligent driving domain controller chips – the “brains” of self-driving cars – foreign players lead by a wide margin. From January to September, Nvidia’s Orin-X and Tesla’s FSD chips accounted for 37.8 percent and 26.7 percent of China’s pre-installed intelligent management domain controller market, respectively, according to local industry research firm Gasgoo. The American company Qualcomm is a leader in the supply of chips for dashboards in the cockpit of vehicles.
Hiccups in chip supply can directly affect vehicle performance. Local tech media outlet 36Kr reported earlier this month that Chinese automakers Xpeng and Nio have reconsidered their decision to adopt Nvidia’s Drive Thor chip following reports that there were production delays.
As Washington tightens sanctions on China’s semiconductor industry, state-backed associations in early December urged domestic companies, including their members in the auto, chip and telecommunications industries, to avoid US-made chips.
“To protect the safety and stability of the automotive industry chain and [the broader] supply chain, the association suggests that Chinese auto companies be cautious when purchasing US chips,” CAAM said in a statement.
MIIT’s Luo said advances in mature-node chipmaking in China are driving improvements in self-sufficiency for analog chips, power devices and sensors. However, mass production of advanced chips faces a significant bottleneck that will take time to overcome, he added.
A growing number of companies, including start-ups and automakers, are entering the race to develop the chips. For example, both Nio and Xpeng announced this year that their self-developed smart driving chips had completed successful trials, the final stage of the new chip’s design.
“These efforts aim to combine custom chips with proprietary software for advanced driver assistance systems to enhance assisted driving experiences and achieve differentiation,” said Ceyuan Liu, an analyst at Canalys.
“The market could eventually move closer to standardized offerings, reducing the profitability of in-house [system-on-a-chip] development,” Liu said.
