China is using its domestic market as a stepping stone to promote 'complete semiconductor independence' in the automotive industry. Leading automotive manufacturers in China are aiming to mass-produce vehicles equipped with 'Made in China' semiconductors starting next year.
Nikkei Asia reported on the 17th (local time) that the Ministry of Industry and Information Technology (MIIT) of China has announced a new policy goal to fully develop and produce automotive semiconductors domestically by 2027. This marks a significant upward revision from the previous goal of increasing the self-sufficiency rate of automotive chips to 25% this year. In response to U.S. semiconductor sanctions, China has been rapidly increasing its production capacity for automotive semiconductors based on mature processes, which have relatively lower technological barriers.
Although achieving 100% reliance on domestic automotive chips is not mandatory, major automotive companies such as Shanghai Automotive Industry Corporation, BYD, Geely, FAW, and GAC have reportedly been actively responding to the Chinese government's localization demands. MIIT regularly requires Chinese automotive manufacturers to check the adoption rate of domestic chips and is leading this project.
The trend of semiconductor localization is gradually expanding into the field of high-performance artificial intelligence (AI) chips for autonomous driving, which has been dominated by U.S. chip companies like NVIDIA. Chinese electric vehicle manufacturer Xpeng unveiled a new vehicle equipped with its self-developed AI chip 'Turing' on the 11th, declaring its technological independence. Xpeng claimed that the computational power of its AI chip is three times that of NVIDIA's automotive chip 'Orin X.'
He Xiaopeng, chairman of Xpeng, noted, "We are focusing on developing functionalities that surpass the limitations of existing general-purpose chips," and he added, "The AI computing performance of most vehicles today does not match that of a single Turing chip." He also announced plans to invest 5 billion yuan (approximately 950 million won) in AI research this year. He stated in a recent interview with the Financial Times that "we are conceptualizing businesses in various fields such as automobiles, aviation, and robotics, so chip development is fundamentally a long-term investment," emphasizing the need for chips capable of supporting all these platforms and running large language models (LLM).
Chinese electric vehicle startup NIO is also equipping five of its car models with its self-developed 5-nanometer (1 nanometer is one billionth of a meter) smart driving chip 'Shengji.' NIO claims that its single chip delivers performance equivalent to four of NVIDIA's 'Orin X' chips.
To accelerate the adoption of domestic semiconductors, the strict certification processes for automotive components, which previously took several years, are being significantly shortened. For example, supplying parts to European automakers typically requires a validation period of 3 to 5 years, while for Chinese manufacturers, this period is only 6 to 9 months. This rapid pace is said to support the swift growth of Chinese component manufacturers.
There are still many opinions in the industry suggesting that it will be challenging for China to raise its self-sufficiency rate in the advanced chip sector quickly due to high dependence on foreign sources. Market research firm TechInsights projected China’s overall semiconductor self-sufficiency rate to be around 17.5% this year. However, it has been noted that China is aggressively increasing its production capacity in mature process sectors, and if the strategy to boost chip self-sufficiency in the automotive industry succeeds, it could lead to changes in the global supply chain. According to the Semiconductor Equipment and Materials International (SEMI), China’s production capacity share in the mature process sector of 14 nanometers (1 nanometer is one billionth of a meter) and below is expected to expand from 31% in 2023 to 39% in 2027, while the U.S. share is anticipated to remain around 5% during the same period.