China’s Electric Vehicle Boom Sparks Chip Demand, But Domestic Supply Lags
As China’s electric vehicle (EV) production surges, the demand for automotive chips has skyrocketed. However, the country’s reliance on foreign suppliers remains a significant concern, with over 90% of its chip needs being met by international companies.
A Pressing Issue
The Chinese government has emphasized the need for self-sufficiency in automotive semiconductors, with officials from the Ministry of Industry and Information Technology (MIIT) and the Development Research Centre of the State Council highlighting the country’s low self-sufficiency rate. According to Luo Daojun, deputy director of the Institute of Components and Materials at MIIT, the self-sufficiency rate of automotive chips in China is less than 10%.
Growing Dependence on Imported Chips
China’s dependence on imported auto chips has become a more pressing issue as the country seeks to assert its leadership in the global EV market. The government has urged carmakers to source up to 25% of their chips domestically by 2025. However, the country’s EV production has grown exponentially, with 11.49 million EVs produced as of November, a 37.5% increase year on year.
Soaring Demand for Semiconductors
The EV boom has led to a significant increase in demand for semiconductors, as electric and smart vehicles require more chips than traditional internal combustion engine cars. The China Association of Automobile Manufacturers (CAAM) estimates that traditional cars require 600 to 700 chips per vehicle, while EVs need around 1,600. Smart vehicles, equipped with advanced features, demand as many as 3,000 chips.
Global Players Dominate the Market
Despite Beijing’s push for self-sufficiency, global players such as Infineon Technologies, NXP Semiconductors, STMicroelectronics, Texas Instruments, and Renesas Electronics continue to dominate the market. In the advanced chip segment, foreign players lead by a wide margin, with Nvidia’s Orin-X and Tesla’s FSD chips accounting for a significant share of China’s pre-installed intelligent driving domain controller market.
Hiccups in Chip Supply
Hiccups in chip supply can directly impact vehicle output. Chinese carmakers Xpeng and Nio were recently forced to reconsider their decision to adopt Nvidia’s Drive Thor chip due to production delays. As Washington tightens sanctions on China’s semiconductor industry, state-backed associations have urged domestic companies to avoid US-made chips.
Advancements in Chipmaking
While advancements in mature-node chipmaking in China are driving improvements in self-sufficiency for analogue chips, power devices, and sensors, mass production of advanced chips faces a significant bottleneck. An increasing number of companies, including start-ups and carmakers, are entering the chip development race, with Nio and Xpeng announcing successful tape-outs of their self-developed smart driving chips.
A Long Road Ahead
As China strives to achieve semiconductor independence, it faces a long and challenging road ahead. While efforts to develop custom chips and proprietary advanced driver assistance systems software may enhance assisted driving experiences, the market may eventually converge on standardized offerings, reducing the cost-effectiveness of in-house development.
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