Rising electric vehicle production in China has increased demand for auto 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 and the Development Research Center of the State Council have repeatedly emphasized China’s low self-sufficiency in automotive semiconductors. “At present, China’s auto chip self-sufficiency rate is less than 10 percent,” said Luo Daojun, deputy director of the Institute of Components and Materials at the Ministry of Industry and Technology, who has been a keynote speaker at several industry conferences this year.
Wang Cheng, deputy director of the Development Research Center, said at another conference last year that China’s dependence on foreign auto chip suppliers reaches 95 percent. “For computing 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 reliance on imported auto chips has become a more pressing issue as Beijing seeks to assert its leadership in the global electric vehicle market amid growing geopolitical tensions with the United States. In May, Nikkei Asia reported that the Chinese government urged the country’s automakers to source up to 25 percent of their chips domestically by 2025.
An employee inspects a silicon wafer at a facility in Binzhou, eastern China’s Shandong province. Photo: AFP alt=An employee inspects a silicon wafer at a facility in Binzhou, in eastern China’s Shandong province. Photo: Agence France-Presse>
This pressure comes amid tremendous growth in the production of electric cars. Data from the National Bureau of Statistics showed that as of November, China had produced 11.49 million electric vehicles for the year, an increase of 37.5 percent year on year. Furthermore, electric vehicles accounted for 40.8% of all cars manufactured in the country.
The electric vehicle boom has led to a surge in demand for semiconductors, as electric and smart vehicles require much more chips than traditional cars with internal combustion engines. The China Association of Automobile Manufacturers (CAAM) said conventional cars typically require 600 to 700 chips per vehicle, while electric vehicles need about 1,600 chips. Smart vehicles, equipped with more advanced features, require up to 3,000 chips.
The increased chip density also translates into a higher value of semiconductors per vehicle. Chip costs as a proportion of total vehicle costs will rise from 4 percent in 2019 to 20 percent by 2030, He Hao, president of Ceres Automotive, an automaker cooperating with Huawei Technologies, said at an industry conference in June.
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 swapping station in Beijing. Photo: Xinhua alt=Electric cars are charged at a new charging and battery exchange station in Beijing. Photo: Xinhua>
In the advanced chip sector, such as intelligent driving control 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 driving controller market, respectively, according to local industry research firm Gasgoo. The American company Qualcomm is the leading supplier of chips for the dashboard in the cockpit of vehicles.
Chip supply hiccups can directly impact vehicle production. Local tech media 36Kr reported earlier this month that Chinese automakers Xpeng and Nio are reconsidering their decision to adopt Nvidia’s Drive Thor chip after reports of them experiencing production delays.
As Washington tightened sanctions on China’s semiconductor industry, state-backed associations in early December urged domestic companies, including their members in the automotive, chip and telecommunications industries, to avoid American-made chips.
“To protect the security and stability of the automotive industry chain and the (broader) supply chain, the association suggests that Chinese auto companies be careful when purchasing US chips,” according to a statement from CAAM.
Luo of the Ministry of Industry and Information Technology said progress in China’s mature chip industry is leading to improvements in the self-sufficiency of analog chips, power devices and sensors. He added that the mass production of advanced chips faces a major bottleneck that will take some time to overcome.
A growing number of companies, including startups and automakers, are getting into the chip development race. For example, both Nio and Xpeng announced this year that their self-developed intelligent driving chips had successfully completed stripping, the final design stage of a new chip.
“These efforts aim to combine custom chips with proprietary advanced driver assistance systems software to enhance assisted driving experiences and achieve differentiation,” said Siyuan Liu, an analyst at Canalys.
“The market may eventually converge on standardized offerings, reducing the cost-effectiveness of in-house (system-on-a-chip) development,” Liu said.
