China’s car-chip shortage could persist for a decade
Sustained geopolitical tensions may affect chip supplies
Jan. China's automotive-chip shortage could persist for as long as a decade, but it has little to do with the current supply glitches snarling production, according to the official who oversees the nation's key new energy vehicle technology development platform.
Short-term factors like mistakes in ordering due to incorrect forecasts and factory disruptions because of Covid-19 will resolve naturally, Yuan Chengyin, general manager of the National New Energy Vehicle Technology Innovation Centre, said. Rather, China's rising demand for electric cars, its lack of domestic technical knowhow and sustained geopolitical tensions
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will emerge as much more serious issues.
"China's chip industry is under tremendous pressure," Yuan said in an interview on Tuesday. "I don't think the issue can be solved overnight."
Carmakers around the world have been hit in recent weeks by a worsening global semiconductor shortage that's led to production cuts and staff layoffs. A deputy secretary general of the China Association of Automobile Manufacturers said last week the chip shortages could've had a relatively big impact on China's car industry from late December and may persist into the second quarter.
The problem as Yuan sees it is more systemic.
The nation's supply chain will continue to be vulnerable to global forces until Chinese companies build up their own manufacturing capabilities and make the semiconductors used in electric vehicles themselves.
"That's the huge challenge," said Yuan, who's also behind the country's first government-backed car-chip industry body, the China Automotive Chip Industry Innovation Strategic Alliance. "If we don't address it, the auto industry could go back to where it was decades ago" in terms of competitiveness.
China imports the vast majority of the chips used in car production. Scaling up won't be easy. There are more than 100 different sorts of chips used in a car, helping to control everything from steering to communication, speed adjustments and power transmission. And the semiconductors for cars versus those in an iPhone or laptop need to be more robust, able to withstand a range of temperatures and much greater forces.
Cars also have longer lifespans than consumerelectronics goods, so the chips need to be highly durable, as well as affordable, considering all automakers are grappling with shrinking profit margins. Additionally, chips used in cars can take up to five years to develop.
Chinese firms need to enhance their competitiveness in the supply chain and speed up development of chips and operating systems, Xiao Yaqing, head of the Ministry of Industry and Information Technology said on January 16.
The chip industry innovation alliance has been identifying semiconductor products that Chinese chipmakers can focus on as a starting point, Yuan said.