Hidden worries! Behind the rise of new energy vehicles in China, domestic automotive semiconductors have only a brief window period

In 2008, China launched its first development plan for the new energy vehicle industry. After more than a decade of hardships and hardships, China's new energy vehicle industry has embarked on a high-quality development path in China and is reshaping the global automotive industry competition pattern. However, in the past, competition relied on specialized technology, and today's competition relies more on the industrial chain.

One problem behind the current booming domestic new energy vehicle industry is that the localization rate of automotive chips is only about 5%, and most of them rely on imported or foreign chip supply. When there was a shortage of chips in 2021, the industry had already discovered this hidden concern. With the continuous development of automotive intelligence and electrification, the autonomous and controllable issue of core technology chips will greatly affect the survival, development, and competition of the automotive industry.

Specifically, data disclosed by multiple domestic enterprises in public shows that among the ten major categories of automotive chips, including control computing, power, communication, storage, analog power supply, drive, sensing, and security, the localization rate of SoC, GPU, FPGA, and other chips in control and computing is only 1%; Communication, perception, and security chips have developed certain research and development capabilities in China, and have entered the stage of research and production. Currently, the localization rate is about 3% to 5%; The power devices and storage devices with a high localization rate have reached around 10%.

At the same time, the demand for automotive chips in China's vast automotive market is increasing. It is expected that the market share of Chinese automotive chips will reach 30% of the global market by 2030, reaching 29 billion US dollars. Each year, 100 billion to 120 billion chips are needed, and each car needs more than 3000 chips if its autonomous driving function reaches L3 or higher levels.

Against the backdrop of low localization rate and high demand, relevant policies have been successively released at the national level to promote the research and development of automotive grade chip technology, and to strengthen the construction of chip supply chain, providing fertile ground for the development of automotive semiconductors. Leading domestic car companies, such as SAIC, Changan, and BYD, have also proposed the need to increase the localization rate of car grade chips, actively promoting the trend of domestic car manufacturers applying domestic chips. The Ministry of Industry and Information Technology has set a goal of achieving a 20% localization rate of automotive chips by 2050, while Shanghai has put forward higher requirements. The goal is to achieve 30% independent application of domestic automotive chips and 70% verification of chip vehicle applications by 2025.

Whether domestically produced chips can be applied to domestic cars in the new environment is a strategic choice for us to promote the transformation of the automotive industry in the new era. For automotive companies, the task and route in the chip localization path is to give local semiconductor companies more opportunities to "get on board". On the contrary, for semiconductor companies, what are the ways to "get on board" their car grade chips?

A person in charge of a domestic automotive chip market told Jiweiwang that firstly, some relatively large vehicle manufacturers in China have a very positive intention to promote domestic substitution, and some of them may also have a certain national task to drive downstream Tier1 and Tier2 manufacturers to also be willing to promote the application of domestic chips. For these manufacturers, their tolerance for domestic chips and their attitude towards trial and error are the first key window for domestic chips to enter the market.

Secondly, in the past two years, there has been a global shortage of automotive chips, and domestic chip manufacturers have encountered a once-in-a-lifetime window of opportunity. However, this window period is very short because the shortage will always come to an end. Whether it is domestic chips or foreign brand chips, the final decision for automotive companies will still depend on the cost-effectiveness of their products. Most domestic car companies are still more willing to choose companies such as Infineon and ST, as their brands and reliability are beyond doubt. Therefore, domestic automotive chips should strive to improve their product performance and reliability during this brief window of opportunity, while optimizing costs, in order to have the strength to compete with European and American manufacturers.

Thirdly, in addition to automotive companies, domestic chips are more likely to collaborate with component manufacturers such as Tier1. Among them, large international companies such as mainland China and Bosch do not have localization rate targets and are major customers. Chip companies provide sufficient support to them, with almost no impact of shortage. It is difficult for domestic chips to enter their supply chain. Therefore, more opportunities for domestic chips lie in domestic Tier1 enterprises, which find it difficult to obtain supplier support equivalent to international Tier1 enterprises, and therefore have a higher willingness to replace domestic chips.

In addition, many domestic car brand manufacturers are more willing to embrace the domestic Tier1 supply chain, which is good news for domestic chips; On the other hand, they are also more actively turning to the international Tier 1 supply chain, such as Anbofu, Keshida, etc. Domestic OEM brands will require some projects to be localized. Although there are relatively few such projects, they are currently the only window for domestic chips to enter the international Tier1 supply chain.

Fourthly, many domestic car brands are currently accelerating their efforts to go global, and the requirements for chip localization differ between models that go global and those sold domestically. Domestic models are mainly mid to low end vehicles, which are more sensitive to price. Therefore, they are more willing to use domestic chips in applications with lower reliability and safety thresholds; Most export models tend to be high-end, and among the main mid size models, the adoption of domestic chips is relatively conservative, depending on product performance. In this case, chips that have been validated in other small and medium-sized projects of the OEM will be used with confidence in the main model.

As for how to accelerate the "launch" of domestic chips, another automotive industry chain insider gave some suggestions. The first type is storage chips that have been mass-produced and applied in certain domestic car companies' models, which can be promoted to more car companies and models. Different car companies may have differences in design and chip standard rules, and chips only need to do some differentiated standard verification work to make their adaptability wider.

The second type is that there is a localization plan, and the chip has been released with samples and verified, but it has not yet achieved mass production for car applications. This type of chip can be screened to help complete reliability verification, vehicle specification certification, etc., and then promoted to component manufacturers or car companies for application.

The third category is some "bottleneck" chips that face significant technological challenges and need to be tackled. The entire industry chain, including chip design and manufacturing, supply chain, and automotive companies, needs to work together upstream and downstream to propose demands, find suitable solutions, and ultimately achieve localization.

Finally, the rise of China's new energy vehicle industry and the acceleration of overseas expansion have raised concerns in the United States and Europe. This month, the European Union decided to launch a countervailing investigation on imported products of new battery electric vehicles originating in China. If there is no foresight, there must be immediate worries. Before potential external risks arrive, it is important to quickly grasp the security of the supply chain in order to calmly respond. Localization requires comprehensive collaboration among all participants in the industry chain, focusing on a common goal to accelerate the large-scale application of domestic chips on the vehicle. Only through effective integration of industrial innovation, technological research and development, and downstream applications can there be hope to compete with international enterprises and truly create a truly strong innovation ecosystem for the domestic automotive chip industry.