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Δευτέρα, 24 Ιουνίου, 2024

China’s aggressive chip strategy sparks global alarm

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China is aggressively pushing itself to develop a self-reliant semiconductor industry. China’s strategic push to enhance its semiconductor capabilities through shrewd policies and economic incentives poses a serious challenge to the global technological balance. China’s ability to exploit loopholes in export controls and leverage opportunities in the evolving EV market has compelled the global community to keep a vigilant eye on China at all times.

The US government recently urged allies, including the Netherlands, Germany, South Korea, and Japan, to further tighten restrictions on China’s access to semiconductor technology, a controversial effort that’s drawing resistance in some countries. Despite US efforts, China has intensified its drive to bolster its domestic chip industry. The purpose behind this strategic move is to achieve self-reliance in semiconductor production and reduce dependency on foreign technology. The Chinese government has implemented various policies and incentives to encourage local chip production, particularly for the automotive sector.

China’s Ministry of Industry and Information Technology (MIIT) has recently urged the nation’s top automakers, including SAIC Motor, BYD, Dongfeng Motor, GAC Motor, and FAW Group, to source up to 25% of their chips locally by 2025. This directive, although not mandatory, is backed by an award or credit system designed to incentivize compliance. The ambitious goal is for all automotive chips to be domestically produced. Currently, local automotive chip supplies account for only about 10% of the market, despite China being the world’s largest car market, selling over 30 million vehicles annually.

The MIIT has also released guidelines on national automotive chip standards, aiming to build a robust ecosystem for such chips. Additionally, China has targeted increased local procurement of other electric vehicle (EV) components, including electronic control units, displays, and charging systems.

The Chinese government’s focus on semiconductors is not limited to the automotive sector. Companies like HiSilicon and Semiconductor Manufacturing International Corporation (SMIC) are pivotal in China’s semiconductor strategy. Despite facing numerous challenges, including U.S. export controls on advanced chipmaking technologies, these companies have made significant strides. For instance, Huawei’s recent launch of the Mate 60 smartphone, powered by domestically designed and manufactured chips, has showcased China’s growing capabilities in high-end semiconductor production.

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China has been investing heavily in research and development, infrastructure, and talent to achieve technological self-sufficiency. The establishment of joint ventures and partnerships with international firms further bolsters these efforts, ensuring that China remains a formidable player in the global semiconductor industry.

The United States imposed strict export controls in March on advanced chip making technologies to curb China’s technological advancements. These measures included plans to impose 100% tariffs on Chinese EVs and raise tariffs on Chinese-made semiconductors to 50% by 2025. The intention behind these restrictions is to hinder China’s progress in developing cutting-edge semiconductor technologies.

The majority of automotive chips, such as sensors, microcontrollers, and power management chips, do not require the most advanced production technologies. Hence, Chinese chip manufacturers can still compete effectively in the automotive sector despite U.S. export controls. Chinese companies have been focusing on less advanced, yet critical, semiconductor components where they can build competitive advantages.

The transition to electric vehicles (EVs) has given a unique opportunity to Chinese chipmakers. The EV industry is still evolving, and supply chains are not yet firmly established. This transitional phase allows new entrants to secure market positions. Chinese companies view EVs as “smartphones on wheels,” leveraging their expertise in consumer electronics to penetrate the automotive sector. BYD, a leading Chinese automaker, has been manufacturing power-related chips. Additionally, the production of power semiconductors like silicon carbide (SiC) is a priority, with European chipmaker STMicroelectronics partnering with China’s Sanan Optoelectronics to produce SiC chips domestically. These efforts enhance China’s competitiveness in the global automotive chip market.

Experts say that replacing established international suppliers entirely will be the main challenge for Chinese companies, preventing them from capturing the entire market. For mission-critical functions like brake systems, reliability and safety are paramount, and automakers are often reluctant to switch from trusted suppliers.

Future Outlook

The semiconductor value per car is projected to rise significantly, from $540 in 2022 to $912 by 2028. The overall market size is expected to grow from $43 billion in 2022 to $84.3 billion by 2028, driven by the increasing number of electric features in vehicles. This growth trajectory is a reminder for the global community that it needs to contain China by hook or by crook…. 

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