China looks for further development to secure better domestic supply of semiconductors

The repercussions of the pandemic continue to dog the global auto industry, with manufacturers shuttering production on certain models due to the supply of semiconductor chips not being able to meet demand.

While analysts forecasted that during the pandemic demand across the board would be down, the complete opposite happened with greater purchases of consumer electronic products such as laptops, tablets and mobile phones, and greater-than-expected demand for cars.

The one thing all of these products have in common is the need for semiconductor chips. The shortage is expected to continue into the middle of this year.

According to sources last week, South Korea's Hyundai Motor will become one of the latest manufacturers to be hit by the shortage, with production expected to be hit in April.

Production of several popular models, including the Palisade, the Tucson and the Genesis GV will be unaffected, but the company has stopped using overtime and weekend hours to produce unpopular models, a spokesman for the company said.

Earlier last week, Japanese automaker Honda said it will extend production shutdowns at most of its plants in the United States and Canada by a week until March 29 because of various supply chain problems.

In recent months, some automakers have been prioritizing the assembly of higher-margin models such as pickups by cutting back on production of sedans and crossovers.

GM and Stellantis have so far managed to maintain production on their truck brands, but Ford has had to cut production shifts on its F-150 pickups.

Swedish manufacturer Volvo, which is owned by China's Geely, announced last week that it is being forced to halt its truck production due to the global shortage of semiconductors.

Consulting firm AlixPartners estimates the chip shortage to cost the auto industry $60.6 billion in revenue this year.

Production in China has not been unaffected either, with industry leaders voicing their opinions and potential solutions to the issue at the recently held two sessions in Beijing.

Zeng Qinghong, chairman of GAC Group and National People's Congress deputy, said that at present, domestic investment in China's chip industry is relatively conservative, and the lack of relevant standards and verification system also limits development.

The chairman suggested that the government further strengthen its support for the automotive electronics industry and more social capital should be invested in chips and key automotive electronic parts.

Despite being the largest vehicle market in the world, and with a robust domestic auto industry, China relies heavily on semiconductor chip supply from countries such as the US, Japan and South Korea.

The independent research and development rate of computing control chips in China is less than 1 percent, communication chips less than 3 percent, and China's market share of sensor chips and memory chips is less than 5 percent, according to An Qingheng, a veteran of China's auto industry and the former chairman of BAIC Group.

The silver lining to the current problems could be the greater development and strengthening of China's domestic chip industry, providing the country with a more secure supply chain.

And industry players have not been sitting on their hands.

Horizon Robotics, a Beijing-based artificial intelligence chipmaker, has made impressive strides in the development and application of autonomous driving intelligent chips. The company is working with an array of mainstream automakers, including Changan Auto, SAIC Motor and Great Wall Motors.

In addition, automakers like Dongfeng Motor and Leap Motor have also sped up their pace of entering the semiconductor industry.

Dongfeng Motor's semiconductor subsidiary, with an annual capacity of 300,000 sets of power chip modules, will go into mass production in April this year.

Chinese telecommunications companies, including Huawei and ZTE, have also developed their own chips and systems.

"While we are far from changing the situation where chips are mainly imported, the entire automobile industry has made progress in high-computing chip platforms, vehicle-to-road collaboration, autonomous driving AI algorithms, and collaboration between chip companies and carmakers, which is very encouraging," An said.