China struggles to build car chip supply chain to break free of heavy reliance on imports
China’s surging electric vehicle (EV) output has ignited demand for automotive chips, but domestic firms remain reliant on foreign suppliers for more than 90 per cent of their needs, according to analysts and industry insiders.
Officials from the Ministry of Industry and Information Technology (MIIT) and the Development Research Centre of the State Council have repeatedly underscored China’s low self-sufficiency in automotive semiconductors. “Currently, the self-sufficiency rate of automotive chips in China is less than 10 per cent,” according to Luo Daojun, deputy director of the Institute of Components and Materials at MIIT, who was a keynote speaker at several industry conferences this year.
Wang Qing, deputy director at the Development Research Centre, told another conference last year that China’s dependency on foreign auto chip suppliers was as high as 95 per cent. “For computing and control chips, the self-sufficiency rate is less than 1 per cent, while for power and memory chips, it is only 8 per cent,” he said.
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China’s dependence on imported auto chips has become a more pressing issue as Beijing seeks to assert leadership in the global EV market amid heightened geopolitical tensions with the US. In May, Nikkei Asia reported that the Chinese government had urged the country’s carmakers to source up to 25 per cent of their chips domestically by 2025.
An employee inspects a silicon wafer at a facility in Binzhou, in 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: AFP>
The pressure comes amid explosive growth in EV production. As of November, China had produced 11.49 million EVs for the year, an increase of 37.5 per cent year on year, National Bureau of Statistics data showed. Further, EVs accounted for 40.8 per cent of all cars manufactured in the country.
The EV boom has led to soaring demand for semiconductors, as electric and smart vehicles require significantly more chips than traditional internal combustion engine cars. The China Association of Automobile Manufacturers (CAAM) said that traditional cars typically require 600 to 700 chips per vehicle, while EVs need about 1,600. Smart vehicles, equipped with more advanced features, demand as many as 3,000 chips.
The rising chip density is also translating into higher semiconductor value per vehicle. He Hao, a president at Seres Automobile, a carmaker collaborating with Huawei Technologies, told an industry conference in June that chip costs as a percentage of total vehicle costs would climb from 4 per cent in 2019 to 20 per cent by 2030.
Despite Beijing’s push, China’s automotive sector remains far from achieving semiconductor independence. Global players such as Infineon Technologies, NXP Semiconductors, STMicroelectronics, Texas Instruments, and Renesas Electronics continue to dominate the market.
EVs are charged at a new charging and battery-swapping station in Beijing. Photo: Xinhua alt=EVs are charged at a new charging and battery-swapping station in Beijing. Photo: Xinhua>
In the advanced chip segment, 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 per cent and 26.7 per cent of China’s pre-installed intelligent driving domain controller market, respectively, according to local industry research firm Gasgoo. US firm Qualcomm leads in the supply of chips for the dashboard in the cockpit of vehicles.
Hiccups in chip supply can directly impact vehicle output. Local tech media outlet 36Kr reported earlier this month that Chinese carmakers Xpeng and Nio were reconsidering their decision to adopt Nvidia’s Drive Thor chip after reports it was experiencing 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 telecoms industries, to avoid US-made chips.
“To safeguard the security and stability of the automotive industry chain and [the broader] supply chain, the association suggests that Chinese automotive enterprises exert caution in purchasing US chips,” according to a statement from CAAM.
MIIT’s Luo said advancements in mature-node chipmaking in China are driving improvements in self-sufficiency for analogue chips, power devices, and sensors. However, mass production of advanced chips faces a significant bottleneck that will take time to overcome, he added.
An increasing number of companies, including start-ups and carmakers, are entering the chip development race. For example, both Nio and Xpeng announced this year that their self-developed smart driving chips had completed successful tape-outs, 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 Ceyuan Liu, an analyst at Canalys.
“The market may eventually converge on standardised offerings, reducing the cost-effectiveness of in-house [system-on-a-chip] development,” said Liu.
