China's Automotive Chip Industry: Challenges and the Path to Breakthrough

Tech 2024-12-12 03:42:27 Source: Network

China's Automotive Chip Industry: Challenges and the Path to BreakthroughSoaring Chip Demand, Low Domestic Production RateSince 2021, the US government has repeatedly imposed large-scale sanctions on China's semiconductor industry, restricting the export of advanced process chips and implementing technological blockades against Chinese companies. On December 2, 2024, the US government announced another round of export restrictions on China, adding over 140 Chinese companies to its trade restriction list, encompassing semiconductor manufacturing equipment, electronic design automation (EDA) tools, and other areas

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The global automotive industry is undergoing a profound transformation, shifting from electrification to intelligence and connectivity. Automotive chips, as core components of intelligent vehicles, are experiencing explosive growth in demand. However, China's automotive chip industry faces enormous challenges, not only in terms of low domestic market share but also significant pressure from international competition and geopolitical factors. This article delves into the challenges, opportunities, and pathways to breakthrough for China's automotive chip industry.

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Soaring Chip Demand, Low Domestic Production Rate

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According to data revealed by Wang Kai, founder of Horizon Robotics, at the 2024 Global Automotive Chip Innovation Conference, the number of chips in a modern car has increased from over 600 to at least 3000, covering control chips, sensor chips, and computing chips. However, the overall share of domestically produced chips remains low, possibly less than 10%, with the share of computing chips even lower, below 5%. This highlights China's high dependence on high-performance chips from abroad, posing significant security risks and technological bottlenecks.

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Escalating US Semiconductor "Containment" of China

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Since 2021, the US government has repeatedly imposed large-scale sanctions on China's semiconductor industry, restricting the export of advanced process chips and implementing technological blockades against Chinese companies. On December 2, 2024, the US government announced another round of export restrictions on China, adding over 140 Chinese companies to its trade restriction list, encompassing semiconductor manufacturing equipment, electronic design automation (EDA) tools, and other areas. This has intensified external pressure on China's semiconductor industry and directly threatens the supply security of Chinese automotive chips.

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China's Countermeasures and Efforts towards Industrial Autonomy

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Facing persistent US pressure, the Chinese government and industry have implemented a series of countermeasures. The Ministry of Commerce has strengthened export controls on key rare metals and materials such as gallium, germanium, and graphite. Four major industry associations (China Internet Association, China Semiconductor Industry Association, China Automotive Chip Industry Innovation Strategic Alliance, and China Communications Enterprises Association) jointly urged the industry to exercise caution when procuring US chips. The State Administration for Market Regulation also launched an investigation into Nvidia. Simultaneously, China is actively promoting the domestic production of automotive chips to enhance the resilience and security of its industrial chain.

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The "Chip Shortage" Crisis and the Rise of Domestic Chips

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Since the second half of 2020, the global automotive industry has experienced a three-year "chip shortage" crisis. This crisis starkly exposed China's reliance on foreign technologies but also spurred the rapid development of its domestic chip industry. Statistics show that the market share of domestically produced automotive chips has rapidly increased from 5% to 10%, with particularly strong growth in power semiconductors, MCUs (microcontrollers), analog devices, and sensors. By the end of 2023, there were over 300 domestic automotive chip suppliers in China.

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The China Automotive Chip Alliance's "China Automotive Chip Alliance White Paper 2.0" indicates that by the end of October 2024, 12 leading automakers had applied over 2000 domestic automotive chips, a 34% increase from the first batch, sourced from over 200 suppliers, a 3% increase. Products cover ten major chip categories used in body, chassis, powertrain, cockpit, intelligent driving, and overall vehicle control systems, with power, communication, and control chips having the most models and widest supplier base.

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Automotive Manufacturers' Independent R&D and Collaborative Deployment

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Facing chip shortages and geopolitical risks, more and more Chinese automakers are actively deploying in the automotive chip industry, adopting various approaches such as independent R&D, investment, and joint ventures. New energy vehicle (NEV) companies tend to favor independent R&D, with NIO, XPeng, etc., announcing that their self-developed chips have completed tape-out. Li Auto plans to establish a chip R&D center in Hong Kong. Traditional automakers are more inclined towards joint development, with SAIC, Dongfeng, Geely, and Great Wall significantly increasing their investment in the chip industry.

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High-Performance Computing Chips: Challenges and Breakthroughs

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Compared to power, communication, and control chips, high-performance computing chips are a major challenge for China's automotive chip industry. These chips are mainly used in intelligent cockpits and autonomous driving systems, crucial for the future development of automobiles. Currently, Nvidia holds a leading position in intelligent driving chips, with its Orin-X chip commanding a significant market share. Horizon Robotics' Journey 5 chip ranks third domestically, but still lags behind Nvidia. High chip costs also constrain adoption by automakers; each additional Orin-X chip can add RMB 20,000 to the vehicle price.

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To break the monopoly of foreign chip manufacturers, more and more Chinese companies are actively developing high-performance chips. Huawei achieved 100% domestic chip production in its Mate70 series smartphones and demonstrates strong domestic capabilities in the automotive field. XPeng, NIO, Geely, Changan, and others are also entering the high-performance chip arena, making significant progress. For example, NIO released the Shenji NX9031 chip, XPeng released the Turing chip, and companies like Black Sesame and Horizon Robotics have also made notable advancements.

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Establishing a Closed Manufacturing Loop: Reducing Reliance on Overseas Foundries

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The advanced process chip production chain comprises design, manufacturing, and packaging. Domestic companies are relatively optimistic about design and packaging. The real challenge lies in manufacturing, where ASML, the monopolist in lithography equipment, and TSMC, a leading foundry, are both subject to US long-arm jurisdiction. Many domestic chips, including those from Horizon Robotics, Black Sesame, Horizon Robotics, Unisoc, and XPeng, rely on TSMC for manufacturing.

To reduce reliance on overseas foundries, Chinese chip manufacturers are actively seeking domestic foundry partnerships. SMIC, Hua Hong Semiconductor, and CSMC are emerging and making breakthroughs. SMIC has become the world's third-largest chip foundry and possesses the technological capability to produce more advanced 5nm chips. The collaboration between Huawei and SMIC indicates China's progress in high-end chip manufacturing.

US Sanctions May Become a Turning Point for Domestication

The implementation of US export restrictions on semiconductors to China may become a crucial turning point for the domestication of Chinese automotive chips. First, it will force more companies to accelerate the shift to domestic chips; second, the Chinese government is actively urging major automakers to accelerate the procurement of domestic chips; third, China's massive market size will drive the rapid development of the domestic chip industry. Once the domestication process accelerates, a virtuous cycle will be formed, attracting more talent and capital investment and pushing Chinese semiconductor standards towards becoming international mainstream standards.

Conclusion: Challenges and Opportunities Coexist

China's automotive chip industry is at a critical juncture full of challenges and opportunities. While facing enormous pressure from international competition and geopolitics, the proactive responses of the Chinese government and industry, along with the rapid advancement of domestic chip technology, provide strong impetus for the rise of China's automotive chip industry. The future success of China's automotive chip industry hinges on continued increases in R&D investment, enhanced technological innovation, a refined industrial ecosystem, accelerated domestication, and ultimately achieving independent and controllable industrial chains. Through government policy support, industry chain collaboration, and corporate innovation, China's automotive chip industry is poised to achieve overtaking on a curve and become a significant force in the global automotive chip industry.

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