China's Automotive Semiconductor Quest: A Drive Toward Self-Reliance

In the high-stakes race for automotive supremacy, China is flooring the accelerator on its semiconductor ecosystem, aiming to power the world’s largest electric vehicle (EV) market with homegrown chips. With EVs humming through its cities and autonomous driving on the horizon, China’s ambition to slash reliance on foreign semiconductors is both a technological crusade and a geopolitical gambit. But as Beijing pours billions into this silicon dream, the road ahead is fraught with challenges that could test its resolve.

Image courtesy: Yole Group

The numbers tell a compelling story. 

In 2024, China’s automotive semiconductor market surged to $419.15 billion, a leap from $280.81 billion in 2020, driven by an 8.9% annual growth rate. EVs, which now account for over 11 million sales annually, are chip-hungry beasts, demanding 1,300-1,500 semiconductors per vehicle double that of gas-powered cars. 

From microcontrollers (MCUs) steering battery systems to System-on-Chips (SoCs) enabling advanced driver-assistance systems (ADAS), the demand is relentless. Yet, China produces just 7-15% of these chips domestically, leaning heavily on imports for 83% of its needs as recently as 2020. This dependency is a vulnerability Beijing is determined to erase.

Under the “Made in China 2025” blueprint, the government has set a bold target: 70% self-sufficiency in semiconductors by 2025. The strategy is multifaceted massive state funding, industry alliances, and a push for localized supply chains. The National Integrated Circuit Industry Investment Fund has funneled over $29 billion into chip development, while the China Automotive Chip Innovation Alliance, with over 70 members, is forging standards and fostering collaboration. At events like the 2024 World Automotive Chip Innovation Conference, the message is clear: China’s auto industry, led by giants like BYD, Geely, and NIO, is no longer content to be a passive consumer of foreign tech.

Image courtesy: Yole Group

Domestic players are stepping up. 

SMIC and Hua Hong Semiconductor are stabilizing 14 nm production, though they trail global leader TSMC by years in advanced nodes. Fabless designers like Horizon Robotics and Axera are making waves in AI-driven SoCs, capturing an 8% share in L2+ ADAS systems in 2023. 

BYD Semiconductor, an arm of the EV titan, has shipped over 2 billion units, dominating power chips like Insulated Gate Bipolar Transistors (IGBTs). Meanwhile, acquisitions of foreign firms like Nexperia and ISSI are bolstering China’s expertise in power electronics and memory.

But the path to self-reliance is not a smooth highway. 

China’s chip industry lags in advanced nodes below 14 nm, memory chips, and critical manufacturing equipment. U.S. export controls, tightened multilaterally with Japan and the Netherlands in 2023, have choked access to cutting-edge tools and 7 nm chips, forcing reliance on black markets or redesigns for older nodes. This tech gap, coupled with global chip shortages, has exposed vulnerabilities that no amount of state funding can instantly bridge. Geopolitics looms large, as the U.S.-China tech decoupling threatens to isolate China from the global innovation ecosystem it still needs.

China’s response is a delicate balancing act: build an open, collaborative supply chain while fortifying domestic capabilities. Automakers like GAC Aion and FAW are investing in chip R&D, while OEMs vertically integrate to secure supply. The push for standards over 30 chip types by 2025, 70 by 2030—signals a desire to reshape the global playing field. 

Yet, foreign giants like Qualcomm, NXP, and Infineon still hold sway, supplying critical components even as they face growing competition from Chinese upstarts.

Looking ahead, China’s automotive semiconductor market is poised for explosive growth, with global demand projected to hit $84 billion by 2028. Investments in Silicon Carbide (SiC) devices, AI SoCs, and connected vehicle chips will fuel smarter, greener cars. But success hinges on closing the technology gap and navigating geopolitical turbulence. If China can pull it off, its chipmakers could pressure global suppliers’ margins, and its OEMs’ export surge could redraw automotive supply chains worldwide.

China’s semiconductor quest is more than a tech story—it’s a test of national will. As the world watches, Beijing’s drive toward silicon sovereignty will shape not just its auto industry but the future of global innovation. The finish line is distant, but China is racing with purpose.