According to Chinese-language media Da Ji Yuan on January 25th, 2022, the supply of chips will remain tight this year, and the shortage of auto chips will expand to 20 percent. 

Luo Junjie, a spokesman for the Chinese Ministry of Industry and Information Technology, attributed the chip shortage in China to the spread of the global pandemic and the “sanctions” imposed by the United States. He predicted that the chip shortage would most impact the auto sector on January 20th, 2021. As a result, many domestic automakers have reduced their output and shut down operations in the past months.

Ye Shengji is the chief engineer and deputy general secretary of the China Automobile Manufacturers Association. He said at the China Automobile Forum in June 2021 that China’s semiconductor supply self-sufficiency rate is currently 15 percent, with auto chip self-sufficiency at less than 5 percent. Among all the chips, the MCU controller chip is in shortage the most, and China’s MCU controller chip companies are the weakest.

In response to his projection, in December 2021, the China Association of Automobile Manufacturers (CAAM) forecast that sales of new energy vehicles in China would reach 5 million by 2022. However, the chip supply is 20 percent short compared to the demand. The chip scarcity would increase further in early 2022.

Data provided by foundries and chipmakers shows that by 2022, automotive microprocessors, storage, logic, and similar chips they produce can only meet the needs of 4 million new energy vehicles in China.

According to Bloomberg, in January 2021, Yuan Chengyin, General Manager of the National New Energy Vehicle Technology Innovation Center, said the leading cause for the shortage of auto chips in China is a lack of technical understanding in the country and persistent geopolitical concerns.

According to Yuan Chengyin, if Chinese enterprises cannot self-produce, overseas factors will continue to influence the domestic supply chain. As a result, the automotive chip scarcity will last for the next ten years.

In an interview with Chinese-language media Da Ji Yuan, Yuan Gongyi, an electronics industrialist based in Hong Kong, said that the US sanctions have made it difficult for Chinese companies to buy chips.

Former US Attorney General William Barr said in a speech at the Center for Strategic and International Studies (CSIS) in February 2020 that, since the 19th century, America’s technological prowess has guaranteed the prosperity and security of this country. The chip industry has become a significant player in the technology war between the US and China. The US sanctioned Huawei twice in 2019 and 2020, blocking Huawei’s access to commercial chips.

Yuan Gongyi said that the US is currently in military competition with China, and chips are an essential component of weapons. Several hypersonic missiles, similar weapons, and other technological weapons must have chips. Because Japan produces many chips for China, recent negotiations between Japan and the United States have focused on ingredients utilized in those chips.

He also said that the Western Pacific Ocean has a great possibility of fire and explosion. The US will stop providing the equipment and related raw materials for chips (which China needs). It’s not just a car problem; it’s a whole Chinese chip problem.

In addition to low production capacity, China’s chip level is also far behind Europe and the US. Mainland Chinese media “Chen Bo observer,” and Mario Morales, vice president of the technology and semiconductors group at International Data Corporation (IDC), agree that the Chinese chip is at least “three to four generations” behind the world’s most advanced level.

Yuan Gongyi said: “The basic problem is that there is no individual creativity, so it will never catch up. Why is the United States so successful? There are many independent thinkers in the United States.”

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