China’s push to localise automotive chips is gaining ground, but mostly in mature control systems rather than high-end computing. Observers say the main hurdles are technical, not geopolitical.
Chips are what make today’s cars smart – managing everything from power, braking, steering and the software behind every screen.
Pop open the hood of China’s latest smart vehicles and a growing share of those chips now comes from domestic suppliers, according to officials and industry observers, as the country’s drive to slot more homegrown semiconductors into cars gains traction.
But analysts say progress remains uneven, with adoption concentrated in core control functions rather than advanced computing platforms that power assisted driving and digital cockpit systems.
And while Beijing contends with a simmering rivalry with Washington and other parts of the West, experts told CNA the hurdles to wider adoption are mostly ecosystem-related, not geopolitical.
The push is unfolding alongside broader efforts to localise China’s semiconductor supply chain, including measures encouraging chipmakers to rely more heavily on domestic equipment.
While chips used for core control systems are relatively mature, advanced processors depend on lengthy certification, deep software integration and stable long-term supply – capabilities that domestic players are still building, analysts said.
Those constraints are most acute in high-end computing and software integration, said David Zhang, secretary general of the International Intelligent Vehicle Engineering Association (IIVEA).
“When automakers adopt local chips, they often have to invest far more time and resources in Research and Development (R&D) integration. This is not something that can be solved quickly, as foreign chips benefit from toolchains refined over many years,” he told CNA.
“HISTORIC LEAP”
The global chip crunch during the COVID-19 pandemic exposed how fragile automotive supply chains could be, and the extent to which Chinese carmakers relied on overseas suppliers.
In the aftermath, Chinese automakers and chip firms have spent recent years working to build a more resilient supply chain and strengthen self-reliance.
Japanese media outlet Nikkei Asia reported in May 2024, citing people familiar with the matter, that China’s Ministry of Industry and Information Technology had encouraged leading automakers to raise domestic chip sourcing to around 20 per cent to 25 per cent by the end of 2025. The ministry has not publicly confirmed the guidance.
Latest indications of progress this year have come from high-profile product launches by leading domestic EV makers.
XPeng debuted its in-house Turing AI chip in the G7 SUV in June and later rolled it out in the updated P7 sedan, describing it as one of its most powerful on-vehicle computing platforms to date.
In November, GAC Aion, a major Chinese electric vehicle maker whose cars are widely used in ride-hailing fleets, said its premium Hyper GT model had entered production, calling it China’s first intelligent new-energy vehicle using 100 per cent domestically designed chips.
Zou Guangcai, deputy secretary-general of the China Automotive Chip Industry Innovation Strategic Alliance, a state-backed group, said China’s automotive chip industry had made a “historic leap” compared with three years ago.
“More than 1,000 companies across the supply chain are now involved, with over 90 per cent of chip products having entered the R&D, validation, mass production or on-vehicle deployment stage,” he said at a forum on Dec 18.
Some new Chinese vehicle models have crossed 20 per cent domestic sourcing, with a small number going further, Zou said.
China EV100, a local industry think tank, has put chip localisation among Chinese automakers at about 15 per cent overall.
Jia Dongyao, an associate professor at Xi’an Jiaotong-Liverpool University (XJTLU), said localisation is advancing in certain chip types, alongside closer coordination across the supply chain.
According to him, progress in automakers’ localisation plans and industry-level coordination has been faster than many external observers might expect, a shift reflected in the ambitious targets now being flagged by some major carmakers.
SAIC Motor and Dongfeng Motor Group have both flagged 2025 as a key milestone, with SAIC targeting around 30 per cent localisation and Dongfeng aiming for 60 per cent, with ambitions to push it to 80 per cent.
Neither company has publicly disclosed whether these targets have been met. CNA contacted both for comment, but did not receive a response by the time of publication.
Jia cautioned that there is no standard metric for chip localisation, and estimates vary widely depending on whether they are calculated by unit count, value, or vehicle model.
Lim Chee Kiang, an automotive consultant at Germany-based Marketperformance GmbH, said China’s localisation push is being driven more by industry dynamics than policy mandates.
“Chinese vehicles … are a lot more advanced in smart cockpit and autonomous driving feature content than vehicles from the West. Fundamental to these software-defined vehicles are the chips or ‘brains’ controlling the systems and sub-systems,” he told CNA.
He added that because Chinese EV makers control vehicle design, software and production domestically, they are in a stronger position to push homegrown chips into real-world use – shaping demand and accelerating the growth of local supply chains.
FROM TRACTION TO FRICTION
But analysts warned that several speed bumps lie ahead for wider homegrown chip adoption among Chinese automakers.
Uneven uptake remains a key sticking point, with localisation strongest in core control components while the most technically demanding systems still rely largely on foreign chips.
“Most of the gains are concentrated in power semiconductors … and intelligent control chips,” Brady Wang, associate director at Counterpoint Research, told CNA, adding that progress is largely driven by the rapid expansion of the domestic EV market.
More than 75 per cent of chips in a typical vehicle rely on well-established technologies where China already has strong manufacturing capacity, analysts said.
Pointing to China’s massive 8-inch and 12-inch mature-node capacity – wafer lines widely used in automotive control systems – alongside advantages in materials, demand and cost competitiveness, Lim said he expects “market forces alone will drive localisation”.
In contrast, high-end processors for more complex tasks, such as assisted driving and top-tier cockpit computing, remain largely sourced from global suppliers.
Leading automotive semiconductor suppliers remain concentrated in Europe, the United States and Japan, analysts noted, and production of the most advanced chips still takes place largely overseas using long-established toolchains.
While some Chinese automakers have made inroads in producing more advanced chips, efforts have been expensive.
NIO’s 5 nm Shenji NX9031 driving chip took three years to develop and cost billions of yuan in R&D, with the company saying the investment was equivalent to building hundreds of battery swap stations.
Supply stability is also critical to ensuring that China’s more than 200 licensed vehicle manufacturers can adopt domestic chips with confidence, experts said.
Leading automakers such as SAIC Motor, FAW Group and Great Wall Motor are already working with domestic automotive-grade chipmakers, including Horizon Robotics and Black Sesame Technologies, on intelligent driving and cockpit systems.
Source: https://www.channelnewsasia.com/east-asia/china-cars-domestic-chips-automakers-localisation-5725321
