Legacy chips are top, modern chips a flop? Car chips are the Achilles heel of Chinese e-mobility

China remains over 90 percent reliant on imports for advanced car chips, according to insiders from the Chinese auto industry who spoke at a recent professional conference.

This figure has sparked discussions among professionals in China, who are urging greater investment in domestic research and development. They emphasize the need to break the "monopolies" of foreign manufacturers through homegrown innovations.

About four years ago, the USA started denying Chinese companies like Huawei or ZTE access to advanced semiconductors in order to slow down China's economic development. This suddenly called into question the quite well-functioning division of labor in the global semiconductor industry.

Not only Chinese, but also international car manufacturers in China face the problem of having to find more and more electronics from local sources in order not to someday get caught in the crossfire of US-Chinese disputes over some parts installed in a car.

In China, therefore, efforts towards "more self-sufficiency" in the domestic semiconductor industry have been intensified since the start of the US chip boycotts. "Localization" has since become a magic word for Chinese top executives, including in the MIIT.

Advanced automotive semiconductors are a shortcoming

For relatively simple chips, such as BCM (Body Control Modules) or PCUs (Power Control Units), domesticmanufacturers in China are actually making rapid progress. However, advanced automotive semiconductors, such as high-performance chips for cockpit control, still have to be almost entirely purchased from foreign manufacturers in China. So there is a structural imbalance in the production of auto chips in China, the Chinese auto portal Gasgoo recently quoted a domestic expert as saying.

"There is a shortage of high-end chips and an excess of low-end chips and that is a structural shortcoming," said Luo Daojun, from the "Institute of Components and Materials of the Fifth Institute of Electronics," run by the Ministry of Industry MIIT. He spoke at the "China Auto Forum 2024".

The number of complex applications in modern electric and hybrid cars is growing rapidly, from ADAS driver assistance programs with route planning and object recognition to the combination of multiple data sets from different sensors (cameras, radar, lidar) to the networking of vehicles with traffic lights or remote control centers.

The demand is growing

In parallel, the number of chips installed in each individual vehicle is also increasing. "More than 1,000 application chips" are already needed in certain car models, said the research and development expert from FAW.

The Chinese Automobile Association CAAM expects this trend to continue in the coming years. It predicts that the number of car chips for relatively cheap electric cars and hybrids per vehicle will rise to around 1,600, while in the future, expensive, particularly "smart" cars will require 3,000 chips per car.

Since the start of the chip boycotts against China, a large number of new Chinese car chip manufacturers have been established, or established companies have newly entered this field with its rapidly growing market.

However, especially with more complex car chips, car manufacturers are reluctant to buy from untested suppliers. Products from young companies are "not easy to use because there is less supportive data and less experience with their application. And customers dare not use them because they do not know where the risks are."

No trivial catch-up race

Despite great efforts, it would not be easy for China to quickly catch up with the USA, Europe and South Korea in the field of advanced car chips, according to the expert close to the Ministry of Industry MIIT.

Many supply chains would first have to be established, along with an entire ecosystem of software manufacturers. Chinese companies were being "strangled" in terms of EDA and IP, Luo said at the car forum. And there was still a "monopoly by Qualcomm on high-end chips for computing power in the cockpit," according to the Chinese specialist.

China must formulate more of its own industry standards and improve its supply chains from chip design to production to packaging and texting of car chips, according to the analysis of the Chinese materials scientist. (sb)

*Henrik Bork is Managing Director of Asia Waypoint, Beijing, PR China 

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