Thanks to the global chip shortage and US sanctions, the year 2021 has been perceived as a turning point for Chinese microcontroller unit (MCU) makers.
Currently, the global automotive MCU market has been dominated by six companies, including Infineon, NXP, Renesas, STMicroelectronics, Texas Instruments and Microchip. Together, these companies have grabbed approximately 90% of the global market. TSMC, meanwhile, has been responsible for manufacturing approximately 70% of these microcontrollers.
China has been playing catch-up though. Currently, only 5% of MCUs in China are sourced domestically, but by 2025 , the number is expected to grow to 25%. For example, the semiconductor unit of BYD, one of the largest EV makers in China, has been looking to develop automotive MCUs. Other Chinese MCU makers include GigaDevice, Ingenic Semiconductor and Sino Wealth Electronic.
Compared to processors, memory ICs, RF units and power semiconductors, there had been relatively less pressure in China to domestically produce microcontrollers, and the sector usually received less policy support.
2021 is a turning point. Apart from the increasing role of MCUs in vehicle electrification, as the US-China trade conflict broke out, the inevitable need to source from non-American suppliers has become a driving force of China’s homegrown MCU industry. In addition, the need to boost production capacity amidst global chip shortage has also hastened the trend of localizing MCU production in China. It is estimated that the global market share of Chinese MCUs will rise from the current 3% to 10% in 2025.
In fact, China’s MCU ecosystem has been gradually maturing, and the industry offers an increasingly diverse portfolio of products. As automotive MCU industry has been closely tied to Tier 1 suppliers, the recent emergence of Chinese Tier 1 suppliers within the past fifteen years has been a boost to domestic MCU players. The national drive of chip autonomy and vehicle electrification have particularly prompted these Tier 1 suppliers to source from Chinese brands. Previously, Chinese Tier 1 suppliers preferred established MCU brands in Europe and the US to meet the strict safety requirements of the automotive industry. In a time when MCUs still represented a small fraction of car production cost, few of these suppliers were willing to take the risk of switching to domestic MCU suppliers.
For now, Chinese MCU suppliers opt to enter the automotive industry via sectors with lower safety requirements, such as in-vehicle infotainment system, and progress further from there. The domestic MCU industry also seeks to advance into the global market via supplying Chinese automakers, and proceed into supplying joint ventures between domestic and international automakers.