BYD Co., China’s largest homegrown electric vehicle maker and also the world’s 2nd largest EV maker by volume, is to spin off its semiconductor subsidiary, BYD Semiconductor, and list it on Shenzhen’s ChiNext – the NASDAQ of Shenzhen Stock Exchange.
The integrated device manufacturer (IDM), also backed by Warren Buffett when he acquired an approximately 10% stake in 2008, is also one of China’s largest EV battery makers. Less known is the fact that it will soon become China’s challenger to dominant power semiconductor makers like Infineon, Mitsubishi and Fuji Electric.
BYD Semiconductor was founded in 2004, back then known as BYD Microelectronics. Last year, it has completed two rounds of funding. Its backers included big names like SMIC and Xiaomi, but also state-owned automobile manufacturers like BAIC Group and SAIC Motor. International investors such as the US venture capital Sequoia Capital and South Korea’s SK Group also invested in the subsidiary.
Back in 2005, BYD already began its research on IGBT (Insulated Gate Bipolar Transistor), a key power semiconductor component necessary in EVs. While the battery represents around 40% of an EV’s cost, the largest share, IGBTs represent the second highest, around 10% of an EV’s production cost.
China’s quest for self-sufficiency
As China pursues IC self-sufficiency, IGBTs have come to be a key battleground. While China represents 40% of the global power semiconductor market, its self-sufficiency rate is merely 10%.
To date, German and Japanese manufacturers dominate the global IGBT market: as of 2020, Infineon accounts for 34% of it, while Mitsubishi and Fuji Electric respectively grab 10% of it. According to data from 2019, Infineon is also the largest supplier of IGBTs in China too, with close to half of the market share. BYD trails behind it with 18% of the market share.
BYD, however, produced its IGBTs mostly for its own consumption. Its expected IPO aims to change this.
Similarly, China accounts for more than 30% of the world automobile microcontroller (MCU) market, but the country depends entirely on foreign suppliers. Given the strict requirements for automobile MCUs in terms of working temperature, defect rates and lifespan, most Chinese MCU suppliers can only provide consumer-grade MCUs instead of the more advanced ones geared for industrial and automobile applications.
The battle for autonomous cars
According to Chen Gang, BYD’s CEO, the company’s semiconductor strategy has been driven by the growing role of semiconductors in EVs. He estimated that the value of semiconductors has doubled as combustion vehicles gave way to EVs. In the future, their value might even increase tenfold.
For Chen, BYD is only entering the second half of the EV game with its semiconductor venture.
With battery technology improving, the the global automobile industry has reached the consensus that automobiles can be electrified. The next push then, according to him, is to apply AI on electric vehicles through autonomous driving and advanced car infotainment systems. Needless to say, semiconductors play a fundamental role in both stages of the automobile revolution.
Autonomous driving can be roughly divided into three parts. The perception part is powered by sensors like cameras, radars and lidars. The planning part is enabled by various controlling units such as Electronic Control Unit (ECU), Vehicle Control Unit (VCU) and Microcontroller Unit (MCU). Finally, the control part is made up by battery and drivetrain.
Not quite there…yet
BYD has been making headway in these three respective areas, according to Chen, and BYD Semiconductor has especially played a vital role in the later two layers. For the execution layer, BYD Semiconductor released its first domestically made IGBTs in 2009 and at the end of 2018 it released IGBT 4.0. However, it was only equivalent to Infineon’s 5th generation of IGBT.
Moreover, Infineon runs a 12-inch production line, while BYD produces only in a 8-inch fab.
For the decision layer, BYD has already released its first generation of singe-core 8-bit MCUs in 2018, and in 2019 it released the 32-bit version. It is planning to release multi-core MCUs in the future.
Crucial to BYD’s autonomy, in 2008 it acquired Ningbo Zhongwei foundry, later renamed BYD Ningbo Semiconductor. After the acquisition, BYD has become the only Chinese IGBT maker controlling the entire value chain from design, manufacturing to packaging and testing.
After the IPO, BYD is set to build an ecosystem instead of manufacturing for in-house applications. There have been claims that BYD Semiconductor is to build automobile-grade Kirin 710 chips for Huawei, but it has not been confirmed yet. Previously, Kirin 710s were produced by SMIC.