The target for the localization rate of automotive chips is 25%! Local automotive MCUs are poised to break through

The latest data from the China Association of Automobile Manufacturers shows that in 2023, China's production and sales of new energy vehicles will exceed 9 million, with a market share of more than 30%, ranking first in the world for 9 consecutive years, becoming an important force leading the transformation of the global automotive industry. Against the backdrop of the continuous increase in the market share and penetration rate of new energy vehicles, automotive-grade chips , as the core key components of the automotive industry, determine the direction of China's future automotive market and are a key step for China to become an automotive power.

To this end, China has been making continuous efforts to build an independent and controllable semiconductor industry chain. Recently, foreign media reported that China is urging domestic automakers to increase the proportion of local procurement of automotive chips to 25% by 2025, aiming to reduce dependence on imported chips and enhance the competitiveness of the domestic semiconductor industry. A person in the automotive industry also revealed that "the 2025 goal is only transitional, and the ultimate goal is to achieve local procurement of all automotive chips."

On the other hand, Chinese automakers, facing increasingly severe supply chain security challenges, are in urgent need of strong domestic automotive chip manufacturers to help them consolidate their achievements in the fields of electrification and intelligence . Taking the public information of Dongfeng Motor Group as an example, it stated that by 2025, it will achieve a 60% localization rate of automotive-grade chips and challenge 80%.

With the resonance of "policy support" and "enterprise demand", domestic automotive chip manufacturers have ushered in a historic opportunity. The first batch of entrants, including Xinwang Microelectronics, have continuously tackled problems with their strong independent research and development capabilities, achieved milestone breakthroughs, and made remarkable achievements.

01. Automobiles urgently need "Chinese chips" under the tide of "New Four Modernizations"

In the era of smart cars , the saying "whoever has the car chip will win the world" has been widely circulated. Guo Shougang, deputy director of the First Department of Equipment Industry of the Ministry of Industry and Information Technology, even summarized the key leading role played by chips in the current century-long transformation of automobile electrification and intelligence as "automotive chips have become the focus of competition in the global automotive industry."

According to the data, in the era of fuel vehicles, the demand for single-vehicle chips was about 300-500, while the current smart electric vehicles carry more than 1,000 chips per vehicle, and the demand for single-vehicle chips for L4-level vehicles in the future will exceed 3,000. Taking the Chinese automobile industry as an example, the sales scale of complete vehicles in 2022 will reach 4.58 trillion yuan, and the sales scale of automotive chips will be 121.9 billion yuan. Its importance is self-evident; in 2030, the scale of China's automotive chip market is expected to reach 29 billion US dollars, and the annual demand will exceed 45 billion chips.

Although my country's demand for automotive chips leads the world, its degree of dependence on foreign countries is very high. The current domestic supply rate is only about 10%. In other words, more than 90% of the chips in each car are imported, and the pain points of "lack of chips and cores" continue to be exposed.

Take MCU, one of the most important and technologically advanced automotive chips, for example. MCU (Microcontroller Unit) is commonly known as a single-chip microcomputer . It can be found wherever computer program control is needed. The automotive end is the world's largest MCU market, accounting for about 33%.

The role of MCU in the car is similar to that of nerve cells in the human body. An average car has 50 to 100 MCUs, accounting for about 30% of the number of semiconductor devices used in a car . They are mainly used in core safety and driving aspects, including control of intelligent driving assistance systems , chassis safety, body control, power control, infotainment, etc. If one of the key ones is missing, the car will face the risk of being unable to be produced.

Figure: Comparison of various index requirements between automotive-grade MCU and consumer-grade and industrial-grade MCU

Although the importance of MCU is well known, automotive-grade MCUs have more stringent requirements in terms of operating environment, reliability, safety, consistency, service life, and long-term supply capacity compared to general-purpose MCU chips. They usually face multiple obstacles such as difficulty in product development, long cycle (usually 34-48 months), complex automotive certification system, long process, and high customer introduction threshold. Therefore, although there are hundreds of MCU companies in China, including some with annual shipments of hundreds of millions of units, most of them are active in the industrial and consumer electronics fields and are particularly cautious about automotive-grade MCUs.

Therefore, for a long time, automotive-grade MCUs have been basically monopolized by foreign manufacturers. According to public information, nearly 98% of the global MCU market in 2021 was occupied by the top seven suppliers, namely Renesas , NXP , Infineon , Texas Instruments , Microchip, STMicroelectronics , etc., without any Chinese manufacturers.

This "weakness" will pose a huge potential risk to the safe and stable development of China's automobile industry at a time when the chip industry is going against globalization. In particular, the White House recently issued a new statement saying that the tariff rate on Chinese electric vehicles will increase from 25% to 100%. Against the backdrop of an increasingly complex external environment, how to build an independent and controllable automotive chip supply chain system has become a top priority for China's automobile industry.

As one of the earliest domestic MCU companies to enter the automotive market, Xinwang Microelectronics started the technology and product development of automotive-grade MCUs in 2015, the third year of its establishment. With rich automotive-grade technology accumulation and product reserves, it mass-produced 8-bit and 32-bit automotive-grade MCU products in 2019 and 2020 respectively. By 2024, Xinwang Microelectronics will have more than 60 automotive-grade MCU products, which can be applied to chassis systems, power systems , body systems, intelligent driving systems and cockpit systems, covering more than 95% of body control application needs.

Today, Xinwang Microelectronics' KungFu core automotive-grade MCU is leading the pack. On March 18, Xinwang Microelectronics officially announced that the cumulative delivery of its KungFu core automotive-grade MCU exceeded 100 million. This achievement not only set a new record in China's industry, but also injected a shot in the arm for the development of localized automotive chips. It also marked a milestone breakthrough in the automotive-grade chip supply chain and the independent ecosystem of processors . Domestic automotive-grade chip manufacturers are accelerating their breakthrough under the "double attack" of ultra-high safety standards and foreign leading manufacturers.

02. Adhere to independent research and development to promote the breakthrough of domestic automotive MCU

As automobiles have become the fastest growing area of ​​semiconductor demand in recent years, "entering cars" has also become a new growth driver pursued by domestic chip manufacturers. According to Gasgoo statistics, there are currently 23 chip companies in China that have deployed automotive-grade MCUs.

However, it is worth noting that most of these companies only started to develop or launch automotive-grade MCU products in 2022. Due to the difficulty and long cycle of automotive-grade MCU certification, it often takes 3-5 years from tape-out to mass production and shipment. Therefore, there are only a few local MCU companies that can truly achieve large-scale shipments. Xinwang Microelectronics, which has been deeply involved in the automotive field for more than ten years, is one of them. It is in a leading market position and has a market share that ranks among the top in the domestic industry.

Just as Rome was not built in a day, Xinwang Microelectronics has grown from a fledgling startup to a leader in the automotive MCU field. In addition to the company's keen grasp of market opportunities and advance technology layout, the continuous enrichment and improvement of the product matrix, and the deep experience accumulated in serving customers, the core is the independent KungFu MCU instruction set and kernel, which enables Xinwang Microelectronics to maintain a unique competitive advantage in the fierce market competition.

Looking at the current situation, "independent research and development" of chips has become a consensus in our country's industry and is a link that must be made up. However, looking back at the beginning of the establishment of Xinwang Microelectronics, domestic MCU manufacturers generally adopted mature ARM cores at that time in order to develop products at a lower cost and seize the market at a faster speed. But in the long run, it is bound to lead to manufacturers being unstoppably forced to be involved in the "vortex" of homogeneous involution. The greater concern is that due to their high degree of external dependence, local MCU manufacturers are like buildings built in quicksand. Once ARM wants to cut off supply and strangle the neck, they may face the risk of crumbling.