China’s Move Towards Semiconductor Self-Reliance in the Face of Chip Wars"
The recent formation of an alliance by investment companies related to GAC Group and Zhejiang Geely Holding Group highlights an escalating dynamic in what could be termed as the "Chip Wars." It is an example of China’s bid to mitigate dependency on external chip supplies and enhance its self-sufficiency in semiconductor production, a critical component in the burgeoning electric vehicle sector.
Xi Zhongmin, deputy general manager of GAC's Aion EV unit, said the company would work with suppliers to use more Chinese-made semiconductor devices in vehicles.
The number of semiconductor devices used per vehicle has increased to about 1,300 to 1,500, as the components needed for electrification have doubled from the previous level and risen eight to tenfold for autonomous driving applications, according to Xi.
The establishment of this coalition emerges as a tactical manoeuvre and is perceivable as a systematic initiative to disentangle from international semiconductor dependencies, predominantly those linked to U.S-based entities like Qualcomm. This intentional detachment appears to be propelled by a fusion of the requisite for technological innovation, apprehensions related to national security, and the encompassing tensions in trade and technology subsisting between the U.S. and China.
The strides taken by China to forge alliances domestically, concentrating on indigenous semiconductor development and fabrication, could represent a pivotal juncture. The alliance is envisaged to collaboratively traverse the perilous yet lucrative terrains of semiconductor manufacturing, thereby attenuating the risks associated with individual investments.
This action stands out as a pivotal effort to reinforce the nation's supply chain in the face of escalating geopolitical frictions and pervasive disruptions in the global supply chain. It not only signifies an evolution in the persisting “Chip Wars” but also unveils the paramount importance of attaining semiconductor autonomy in preserving and propelling national automotive sectors forward.
U.S. chipmaker Qualcomm is eliminating hundreds of jobs in China and Taiwan in the face of a downturn in the smartphone market and China supplying more of its own chips. © Reuters
Despite the ongoing technology and trade tensions between the U.S. and China, representatives from U.S. chipmaker Qualcomm were in attendance. The company, which is currently reducing its staff in China due to a downturn in the industry, was present to highlight its long history of supplying products to numerous Chinese auto models. Furthermore, Qualcomm expressed its intention to continue expanding its business operations in China.
Sectoral Repercussions expanding Autonomy:
An official from the Ministry of Industry and Information Technology has conveyed that Beijing is poised to orchestrate endeavours by semiconductor firms to augment production capabilities and fortify collaboration with preeminent automakers.
China's aspiration to bolster its semiconductor self-sufficiency from a modest 7% in 2022 epitomises a deliberate endeavour to master a pivotal element in the automotive industrial framework. Given the projections of the semiconductor market in China to nearly double by 2027, it’s clear that the ambition is to assert control over the supply chain and, implicitly, the trajectory of the automotive sector.
The formation of this strategic consortium is poised to provoke a considerable reconfiguration in global semiconductor supply architectures. The anticipated elevation in domestic semiconductor manufacturing in China could disrupt prevailing market equilibriums, potentially culminating in an oversupply in select semiconductor domains.
Moreover, the dominant narrative posits that the relentless focus on autonomy and localised production might instigate marked segmentation in the global semiconductor marketplace. This could intensify the extant "Chip Wars," exacerbating prevailing frictions and potentially precipitating a technological schism between China and other technological behemoths, most notably the United States.
The Role of Innovation and Collaboration:
While the alliance portrays a façade of collaboration, it could inadvertently stifle innovation due to reduced global cooperation. Although it is a manifestation of economic resilience and strategic foresight, the nuanced implications suggest that it may be an accelerator in the competitive race for semiconductor dominance, with repercussions extending beyond the automotive industry.
The formation of this intra-national alliance in China underlines the shifting paradigms in the semiconductor sector as part of the larger "Chip Wars." The underlying currents of this development suggest a critical introspection within China regarding its international technological dependencies.
The implications of such a shift are profound, affecting global supply chains, international collaborations, and the innovation landscape. It also emphasises the critical role semiconductors play as the cornerstone in the strategic development of nations in the current geopolitical climate.
