Chinese self-driving car manufacturers now face the problem: chip technology lags behind that of the United States, and production cannot be autonomous, leading to the resistance of China’s self-driving development.

The Financial Times reported on Feb. 22 that Jidu, a joint venture between Baidu and car manufacturer Geely, is demonstrating Robocar, a self-driving car, after two years of development. However, Robocar’s brain reveals the problem of technological independence.

Chinese driverless car companies still rely on chips designed by foreign companies, mainly US-based NVIDIA, Qualcomm, and Intel, all manufactured overseas.

US-China tech war

Recently, growing tensions between the U.S. and China have evolved to the point where both sides see semiconductors as a national security issue, increasing government financial support and restrictions on sales and acquisitions.

Last year, following the Committee on Foreign Investment in the United States (CFIUS) investigation into national security risks, the Chinese government-backed private equity firm Wise Road Capital Ltd. canceled its planned $1.4 billion acquisition of South Korea’s Magnachip Semiconductor Corp.

Wise Road Capital LTD is focused on five specific sectors: semiconductors, big data, Internet of Things, Telecommunications, and Storage Servers. On Dec. 1, 2021, Sunrise—a primary Taiwanese semiconductor packaging and testing company—announced the sale of four plants in China to Beijing Wise Road Asset Management Co.

The Washington Post reported on Feb. 10, 2022, that CFIUS does not appear to have investigated the transaction to date. Still, given the importance of Taiwan’s chip industry to U.S. interests, such a deal could face U.S. scrutiny.

China’s domestic auto chip development still faces a series of problems

TSMC, the largest processor chip maker, plans to increase its capital expenditure by $44 billion this year alone. In comparison, SMIC, the largest contract chipmaker in mainland China, intends to spend $5 billion. Most industry experts believe that SMIC is still five years behind TSMC in technology development.

Bloomberg Opinion wrote that Chinese electric car maker Xpeng uses NVIDIA’s artificial intelligence chips, costing up to $999/chip, while parts that control a car’s screen display are only $1. TSMC makes the best of NVIDIA’s semiconductor chips, while SMIC makes screen controllers and other less advanced products.

Thus, Bloomberg Opinion writes that spending $11 billion on large factories to produce generic parts will not bridge the gap between SMIC and TSMC.

China’s chip industry still lags behind US competitor for several years

The Financial Times cited Deloitte as saying that many chip design companies are developing in China, including Integrated Circuits and Biren Technology. Although the Chinese chip industry attracted $3.85 billion in venture capital investment in the first half of 2021, it still lags behind its U.S. competitors by several years.

Bain & Company’s China semiconductor expert Velu Sinha said that NVIDIA had benefited from the success of its GPU (graphics processing unit) technology.

Sinha said, “Billions of dollars have been pouring into this space. But right now, Nvidia continues to be in a really healthy spot.”

Randy Abrams, head of Asia semiconductor research at Credit Suisse, told the Financial Times that Chinese electric vehicle groups still need to use “best of breed” for crucial technologies.

Abrams added, “Nvidia still is more advanced on the in-vehicle processing and also the A.I. training and simulation work needed to develop these platforms.”

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