China’s automotive industry relies on locally produced chips for less than 1% of its needs. In the fields of power electronics and memory chips, the share is only 8%. Last spring, the Chinese government set a target to increase the use of domestically produced chips to 25% by the end of this year.
The production of electric vehicles (EVs) in China is rapidly growing, further amplifying the demand for chips. While traditional internal combustion engine (ICE) vehicles require 600-700 chips per car, EVs demand up to 1,600 chips per vehicle. Features like autopilot can push this number to as high as 3,000 chips. In the first 11 months of last year, China produced 11.49 million EVs, a 37.5% increase compared to the same period in 2023. EVs accounted for 40.8% of all passenger cars manufactured in the country.
The share of chips in a vehicle’s production cost is also rising. In 2019, chips accounted for 4% of a car’s total cost, but by 2030, this figure could climb to 20%. Despite this, most chips manufactured in China are produced by foreign companies such as Infineon, NXP, STMicroelectronics, Texas Instruments, and Renesas Electronics. The dominance of foreign companies is even greater in advanced automotive electronics markets. For example, Nvidia’s Orin X and Tesla’s FSD processors captured 37.8% and 26.7% of the market, respectively, from January to September last year. Qualcomm dominates nearly all automotive infotainment chip systems. In early December, the Chinese government warned local automakers about the risks of overreliance on U.S.-made chips.
Domestic chip manufacturers primarily offer analog solutions, power electronics, and certain types of sensors. However, developing advanced electronics remains challenging under current sanctions. Even so, companies like Nio and XPeng have announced the completion of their own autopilot processors. In the future, creating unified solutions for the entire Chinese automotive industry could be highly beneficial. Standardization and large-scale production would help reduce the costs of both manufacturing and purchasing these components.
