China’s rapid expansion in electric vehicle (EV) production has spotlighted a significant vulnerability: a heavy reliance on imported automotive semiconductors. Despite being the world’s largest EV manufacturer, China’s self-sufficiency in automotive chips remains below 10%, posing challenges to its ambitions for technological independence.
The Growing Demand for Automotive Chips
The surge in EV production has exponentially increased the demand for automotive semiconductors. Traditional internal combustion engine vehicles typically require 600 to 700 chips per vehicle. In contrast, EVs necessitate approximately 1,600 chips, and smart vehicles with advanced features may demand up to 3,000 chips per unit.
As of November 2024, China produced 11.49 million EVs, marking a 37.5% year-on-year increase and accounting for 40.8% of all cars manufactured in the country.
South China Morning Post This explosive growth has intensified the need for a robust and self-reliant automotive chip supply chain.
Current Self-Sufficiency Levels
Despite government initiatives, China’s self-sufficiency in automotive semiconductors is alarmingly low. Luo Daojun, deputy director of the Institute of Components and Materials at the Ministry of Industry and Information Technology (MIIT), stated that the self-sufficiency rate is currently less than 10%. For computing and control chips, the rate is below 1%, and for power and memory chips, it stands at only 8%.
Government Initiatives and Challenges
In response to this dependency, the Chinese government has urged domestic carmakers to source up to 25% of their chips locally by 2025.
South China Morning Post This directive is part of a broader strategy to achieve technological self-reliance amid geopolitical tensions and trade restrictions, particularly with the United States.
However, building a self-sufficient automotive chip supply chain is fraught with challenges. The semiconductor industry requires substantial investment, advanced technology, and a skilled workforce. Additionally, the complexity of automotive chips, which must meet rigorous safety and performance standards, adds another layer of difficulty.
Global Implications
China’s efforts to localize its automotive chip production have significant global implications. A shift towards self-reliance could disrupt existing supply chains and impact international semiconductor manufacturers that currently supply to China. Moreover, as China accelerates its localization efforts, it may influence global semiconductor pricing and availability.
Conclusion
China’s ambition to reduce its dependence on imported automotive semiconductors is a strategic move towards technological sovereignty. While the challenges are substantial, the government’s commitment to increasing self-sufficiency indicates a determined effort to overcome these obstacles. The success of this initiative will have profound effects on the global automotive and semiconductor industries in the years to come.
