China urges EV makers to buy homemade chips

Government wants factories to be less reliant on U.S.

The Chinese government has quietly asked electricvehicle makers from BYD Co. to Geely Automobile Holdings Ltd. to sharply increase their purchases from local auto chipmakers, part of a campaign to reduce reliance on Western imports and boost China's domestic semiconductor industry.

The Ministry of Industry and Information Technology asked automakers this year to expand their buying of homegrown components to accelerate the adoption of Chinese chips, according to people familiar with the matter. The country's tech overseer previously set an informal target for automakers to source a fifth their chips locally by 2025, but has grown dissatisfied with the pace of progress, the people said.

The ministry is now directly instructing firms to avoid foreign semiconductors if at all possible, said the people, who asked to remain anonymous discussing sensitive information. That means overseas chip firms effectively have to manufacture their silicon through a local foundry such as Semiconductor Manufacturing International Corp. or Hua Hong Semiconductor Ltd., one of the people said. During a recent tender conducted by a major domestic brand, one foreign bidder failed to secure a contract despite offering a price they estimated was 30% lower than the eventual winner, another person said.

The developments reflect Beijing's stepped-up efforts to galvanize its own tech sector, a response to U.S. attempts to curtail Chinese chip development via sanctions and restrictions on the sale of advanced technology. The Chinese directive on cars casts uncertainty over the business of companies from Nvidia Corp. and NXP Semiconductor NV to Renesas Electronics Corp. and Texas Instruments Inc., which compete with local firms to supply the world's largest EV market.

Shares in European chipmakers that supply Chinese EV firms fell in early European trading. Infineon Technologies AG slid as much as 4.8%, while STMicroelectronics NV slid 2.2%.

Many local brands buy a hodge-podge of other components from power man