Domestic automotive chip companies are breaking the original market pattern

Interface News Reporter | Zhou Shuqi

Interface News Editor | Zhao Baiyuan

A smart electric vehicle requires up to 3,000 chips, involving more than 150 types, but this part is more difficult to be perceived by consumers than the appearance and comfort configuration. For a long time, the automotive chip market was firmly controlled by giants such as Infineon, NXP and Renesas of Japan, and now this pattern is reversing.

According to the official website of the General Administration of Customs of China, the cumulative number of integrated circuits imported by China in 2023 will decrease by 10.8% compared with 2022; The value of imports decreased by 15.4% year-on-year. Behind the numbers is that China is reducing its dependence on foreign countries. The China Electric Vehicle 100 Association pointed out that the overall localization rate of automotive chips has risen from less than 5% in the past to 10% now.

Taking IGBT chips, which are one of the most widely used chips in new energy vehicles and account for about 10% of consumers' car purchase costs, as an example, domestic chip manufacturers are dominant. These power devices are responsible for converting the battery's direct current into alternating current to drive the electric motor to power the vehicle.

According to the data provided by Rollarberg to Jiemian News, the market share of domestic IGBT in 2021 was about 20%, and it has rapidly increased by more than half in 2023. Power device semiconductor products represented by IGBT are expected to reach more than 30% domestic substitution in 2025 and more than 50% from 2027 to 2028.

At one time, Infineon accounted for more than 90% of the global market share of IGBT chips. However, the development of new energy vehicles has pushed domestic automakers to start developing their own powertrains, and with low prices and quick responses, these rising stars have entered the supply chain system of auto companies that are known for their conservative speed.

The main reason for this shift is the core shortage crisis between 2021 and 2022, which has led to a gap in demand due to factors such as the epidemic, geopolitics, and fluctuations in production capacity and transportation, which has become a catalyst for independent brands to accelerate the substitution of domestic chips. Domestic auto companies have begun to rethink their chip procurement strategies and turn their attention to domestic semiconductor products.

Shi Shuai, global partner of Roland Berger, pointed out in an interview with Jiemian News that considering the maturity of the domestic industrial chain and the evolution of the international political environment, the substitution of domestic chips must be a definite and irreversible trend.

"At a time when the price competition of new energy vehicles is becoming increasingly fierce, there is a strong demand for automobile companies to reduce costs. The use of more cost-effective domestic IGBT solutions on low-end models with relatively balanced technical requirements has also become the first choice. ”

An IGBT R&D personnel told Jiemian News that Chinese auto companies have been at the forefront of the industry in terms of intelligent and electrification needs, and it is now difficult to purchase suitable three-electric products from Tier 1 powertrain suppliers, and international brands such as Infineon cannot directly meet the technical needs of car manufacturers. In order to speed up the pace of transformation, independent brands provide greater support to domestic power device companies.

In 2022, a large number of domestic IGBT chips will begin to be "on the car", filling the market gap caused by Infineon's shortage of supply.

"At present, the new forces have basically switched from Infineon to domestic chip manufacturers such as CRRC Times and Silan," the above-mentioned R&D personnel told Jiemian News.

In addition to the stable supply chain, better cost performance is also one of the advantages of domestic chips. Jiemian News learned from industry insiders that compared with overseas manufacturers, Chinese chip companies are willing to sacrifice a certain gross profit margin for market share, and the pricing is relatively low.

In addition, as the demand for consumer electronics semiconductors shrinks, chip manufacturers such as SMIC and Hua Hong Semiconductor have tilted their wafer resources to automotive-grade semiconductors, and their production capacity has expanded rapidly in the past two years, promoting the emergence of scale effects and reducing production costs.

Some leading multinational auto suppliers have also included domestic chip companies in their designated selection. Chen Yudong, President of Bosch China, pointed out in an interview with Jiemian News and other media that if the chips produced in China meet the technical requirements and the prices are competitive, Bosch will also actively purchase them.

An industry insider in the IGBT field revealed to Jiemian News that Infineon, whose market share is gradually declining, is actively reducing prices to maintain market share, but the price is still two to three percent higher than that of domestic chip manufacturers.

Three years ago, Infineon's IGBT module worth about 2,000 yuan was in short supply, and domestic automakers queued up for goods; Three years later, Infineon cut the price of IGBT modules in half, but the former customers have switched to domestic chip companies.

Domestic brands and domestic chip companies play a key role in this change. BYD is an important pole to promote the localization rate of IGBT. This local car manufacturer was the first to lay out industrial-grade IGBT products, and later developed its own automotive-grade IGBT. With the rapid rise in BYD's new energy vehicle sales, domestic chip leaders have seen the development potential of the vehicle-grade IGBT market. Driven by market increments, these new players follow BYD and tilt R&D resources towards related products.

The same storyscript takes place in the world of high-performance MCUs. As the E/E architecture evolves from distributed to centrally integrated, high-performance control chips that can replace multiple small electronic control units (ECUs) at the same time have become a rigid demand. Chen Shujie, vice president of SemiDrive Technology, pointed out in an interview with Jiemian News that at this time, domestic chip companies and overseas manufacturers are on the same starting line.

Chen Shujie told Jiemian News that the frequent occurrence of black swan events such as geopolitics and the epidemic has made domestic auto brands realize that they cannot completely rely on first-tier suppliers to provide a set of international solutions, and they need to prepare a set of domestic solutions in parallel.

"Chips are a winner-takes-all industry, and international chip giants have been developing for a long time and have a more tacit understanding with traditional multinational automakers and suppliers. The lack of cores in the industry has allowed domestic auto companies to form a direct dialogue with chip manufacturers, breaking the monopoly of traditional multinational first-tier suppliers. ”

Chen Shujie mentioned that when domestic manufacturers were looking for domestic high-performance MCU chip supply guarantee solutions, SemiDrive was the only choice. It is reported that in the past two years, the market share of domestic high-performance MCUs has gradually increased from 0 to about 10%, and it is expected to achieve a market share of 20% in two years.

The high-performance MCU field that SemiDrive focuses on does not have a significant advantage in the price of a single chip, but Chen Shujie revealed that this chip can help automakers save vehicle material costs by being compatible with more localized software and hardware configurations. In addition, domestic chip companies such as SemiDrive can cooperate more efficiently to improve the R&D efficiency of OEMs and reduce R&D costs.

Especially under the development trend of automotive intelligence, automobile companies will take the initiative to cooperate directly with chip manufacturers to achieve in-depth joint development of software toolboxes, development platforms and even application software research and development. This requires chip manufacturers to be able to respond quickly and provide customized solutions, which is difficult for multinational chip giants to do.

Overseas chip manufacturers have not given up on China, the world's fastest-growing market for new energy vehicles. International chip manufacturers can achieve lower comprehensive costs by virtue of the larger volume of global supply.

In May last year, the American chip giant Texas Instruments comprehensively lowered the price of chips in the Chinese market, trying to seize more market share by cutting prices. This has caused the gross profit margin of the domestic industrial chain to continue to decline.

As of 2023, the world's top 10 most profitable automotive semiconductor companies are still occupied by traditional giants, and the soaring sales of electric vehicles have led to the growth of automotive semiconductor revenue, and the expansion of the market has also brought more fierce competition.

Independent chips are changing from "difficult to get on the car" in the past to competing with international giants. At present, there is no obvious technical gap between domestic and foreign platform technology products for IGBT mass production and on-board vehicles, but Infineon has proposed innovative development in the design of next-generation chip materials and process structures. The localization rate of IGBT chips is still in the process of dynamic change.

The technical difficulty of automotive-grade chips with mature manufacturing processes also requires self-built production lines and mastery of core manufacturing processes to ensure the achievement and good consistency of automotive-grade quality standards and reliability standards. Shi Shuai told Jiemian News that the more traditional process chip products, the more they need to build their own production lines to ensure the core competitiveness of quality and cost, and they need to be supported by sufficient automotive-grade mass production and application experience.

In chip products involving underlying control and driving safety, the requirements for product reliability and quality are very strict, which requires strict control and experience injection from the whole link from design to manufacturing by domestic chip companies, as well as the gradual accumulation of trust in their products by automobile manufacturers.