Will Chinese car companies be caught up in a chip war after Huawei?

A few days ago, Huawei's consumer business CEO Richard Yu reluctantly admitted that Kirin high-end chips will stop production after September 15, becoming a swan song. The reason is well known, it is the US sanctions. Many people feel that the recent actions of the Americans have refreshed their worldviews, but in fact they are just repeating a scene from decades ago, when the victims were the Japanese.

Chip Wars

After World War II, the United States occupied Japan. Later, in order to allow Japan to support itself and because of the Cold War, the United States began to support Japan's economy. Later, the Americans found that Japan was a bit ungrateful - they helped Japan rebuild its textile industry, and it exported clothes to the United States; they helped Japan rebuild its metallurgical industry, and it exported steel to the United States; they let Japan learn to build its own cars, and it exported cars to the United States...

The massive invasion of Japanese products hit the related industries in the United States, so the United States launched a trade war to fight back. In the last issue of "Car News", we also talked about the story of the United States suppressing Japanese car companies, but many netizens said that those methods were too "conventional" and could not be compared with suppressing Huawei. In fact, there was also a more tragic "war" between the United States and Japan, and the battlefield was similar to today, that is, the field of semiconductor chips.

In 1958, Americans Jack Kilby (Texas Instruments engineer) and Robert Noyce (Intel founder) invented the integrated circuit chip almost simultaneously, an invention that changed the world. In the 1960s, Japan's NEC Corporation introduced integrated circuit technology from the United States and shared it with Mitsubishi and other companies under the leadership of the Japanese government.

The Japanese government knew that Japanese companies could not defeat the Americans alone, so they brought together five companies, Hitachi, NEC, Fujitsu, Mitsubishi, and Toshiba, to form a national VLSI technology research group (with national subsidies for research funding). The Japanese, who concentrated their efforts on major tasks, quickly completed the industrial layout in just a few years, and then conquered cities and territories along the way, killing American chip companies one by one. Intel, the leader in the DRAM chip industry, almost went bankrupt and was later forced to leave the industry.

Like other industries, the US semiconductor industry also began to seek government intervention, and the US government did provide some support such as tax cuts. At that time, the US FBI also arrested six senior engineers from Hitachi and Mitsubishi on charges of stealing confidential technology from IBM through bribery. However, in fact, these six people never met anyone from IBM from beginning to end. The people who "dealt" with them were FBI agents pretending to be IBM employees... Yes, this was a sting operation.

Why chips?

The Semiconductor Industry Association (SIA) of the United States felt that the government's measures were far from enough, so it started to talk about a word - national security. Does it look familiar? It has been used a lot in the current Sino-US trade war. SIA's logic is very clear. High-tech weapons all use chips. When domestic chip companies are squeezed to death by the Japanese, American weapons can only use foreign chips, which will definitely be restricted by foreign countries. What's more frightening is that these chips are likely to flow into the Soviet Union.

The US government thought it made sense, so it decided to take drastic measures. In 1986, the United States ruled that Japan was engaged in dumping DRAM chips and imposed a 100% anti-dumping duty. In the same year, Japan was forced to sign the Japan-US Semiconductor Agreement, which stipulated that semiconductors sold by Japan to foreign countries must be calculated through US cost accounting before they can be sold at a price... Later, the United States supported the Korean semiconductor industry and excluded Japanese companies such as Nikon and Canon from the high-end EUV lithography technology, causing them to fall from first-rate to second-rate. This decades-long semiconductor war ended with Japan's defeat.

Because of the "national security" label, the Japanese semiconductor industry has been suppressed by the United States with all its might, which is fundamentally different from the suppression of the automobile industry. Today, the United States is suppressing Chinese technology companies based on the "national security" argument, and the means are even more extreme: Huawei HiSilicon is already a top chip design company, and the United States does not allow TSMC to manufacture, so its high-end chips are out of stock; SMIC is also a large-scale chip manufacturer, and the United States does not allow ASML to sell EUV lithography machines, so its technology level is "locked".

In fact, even if SMIC bought EUV lithography machines, it would most likely not dare to manufacture for Huawei like TSMC, because if you do, you will also be sanctioned. Taiwanese companies listen to it, Dutch companies listen to it, and even mainland Chinese companies have to listen to it. The reason why the United States can "command the world and no one dares to disobey" is because it has many core technologies in its hands, such as chip design software EDA, lithography machine light source components, instruction set architecture, etc. Behind these core technologies is its "dominance" in the field of basic science.

my country's research funding is second only to the United States, but the proportion of basic science funding is only one-third of that of developed countries. We have always been shortcoming of focusing on technology and neglecting science, which is also an important reason why we are frequently "choked". Ren Zhengfei once said that we are used to building bridges, roads, and houses by just throwing money at them, but for chips, throwing money at them is not enough. We need to throw mathematicians, physicists, chemists...

Automotive Electronic Chips

Finally, back to cars, will there be domestic car companies in the future that will be "choked" by the United States on chips like ZTE and Huawei? Although the chances of this happening are not very high (after all, Chinese brands have not entered the US market in a big way), it is theoretically possible because there are so many chips in cars nowadays.

Since most automotive electronic chips are not purchased directly by car companies, but are integrated into their own systems by first-tier suppliers such as Bosch and Continental and then sold to car companies, automotive electronic chips are still very unfamiliar to ordinary car owners. The current mainstream automotive electronic chip brands include NXP (Netherlands), Infineon (Germany), STMicroelectronics (Italy & France), Renesas (Japan), and Cypress (USA). In addition, traditional chip companies such as Intel, Qualcomm, and Nvidia have recently shown their intention to enter the automotive chip field, while vehicle companies such as Tesla and Toyota have begun to try to develop automotive chips with certain specific functions on their own.

Unlike consumer electronics chips, automotive chips have much higher requirements for ambient temperature, vibration, electromagnetic interference, reliability, and service life. After all, if a consumer electronic product has a problem, it will at most freeze up, while a failure in automotive electronics will directly affect people's lives. my country's consumer electronics chip design is already very strong, but it has just started in the field of automotive chips.

As latecomers, Chinese companies face many difficulties in entering the automotive electronic chip market with strict barriers. Of course, there is hope. Everyone has a similar starting point in emerging fields, which is a good opportunity. In recent years, a number of Chinese chip companies have achieved results in electrification, autonomous driving, and smart car machines. BYD's chips have been used in its own electric vehicles; Horizon's AI chips have been adopted by many internationally renowned first-tier suppliers, and there are many similar examples.

Back to the topic of "stuck neck", most automotive electronic chips do not require high-precision processes such as 7nm and 5nm like consumer electronic chips, and many chips are designed and manufactured by themselves, without relying on external wafer foundries. However, from the perspective of the entire industrial chain, it is difficult to say that it is completely unaffected by the United States. Even the most important reliability certification AEC standard for automotive chips was developed by Americans, and it is not easy to completely bypass the United States.

In recent years, the word we often hear about the technological blockade of Western countries is "reverse pressure". I believe that my country can also take this opportunity to force a more robust chip industry and force the emphasis and investment on basic science. If one day, students majoring in mathematics, physics and chemistry are no longer asked "What's the use of studying this?", we probably won't be "stuck in the neck".

Another important advantage of my country over Japan is that it has a sufficiently strong domestic market, which plays an important role. Although the "internal circulation" is not as transparent as the "external circulation", it can also allow you to breathe when the environment is not good. I believe that our chip companies will definitely survive!