Chinese companies still make up a very small percentage of the global automotive semiconductor market, but things are starting to change. As we shall see, the Chinese companies that are most successful in the automotive space are mainly foreign-founded companies that became Chinese through acquisition.The main types of semiconductors that go into a car are control chips, analog and mixed signal power chips, sensors, wireless communications, interface chips, and memory chips. I will concentrate on the areas I think China is growing: MOSFETs, memory, image sensors, and autonomous driving chips. It happens that these are the areas where I have the most hands-on experience.
Power electronics
Power transistors are abundant in the high tech cars of today: windscreen wipers, windows, and sunroofs use metal-oxide-silicon field effect transistors (MOSFETs). Roughly speaking, a MOSFET uses an electric field to control the flow of electrical currents. Metal-oxide-silicon (MOS) is the material they are made of, and field effect transistor (FET) is the type.MOSFETs are relatively simple and cheap to produce, so automakers use them for controlling and converting electric power—what is known as power electronics. What is making them more and more interesting for China is their use in power electronics for electric vehicles: DC/DC converters, on-board chargers (OBCs) that allow electric and hybrid vehicles to charge from any AC power supply, and traction inverters that convert electricity from the battery to AC power that can be used by the engine. As EVs become more common, use cases for newer materials are becoming more apparent. Wide-band gap (WBG) materials like gallium nitride (GaN) and silicon carbide (SiC) in FETs are newly applied in power electronics, and allow for higher voltages, which are required for faster switching speeds. This in turn improves the power conversion efficiency, and therefore the range, of EVs.Tesla has gone the route of using SiC MOSFETs from ST Micro for its inverter in newer models. It previously used insulated-gate bipolar transistors (IGBTs). Others, like Nexperia, have chosen to use GaN instead.There are concerns that WBG materials are unreliable, such as being extremely sensitive to gate voltages with absolute maximum values close to recommended operating conditions. But that’s what automotive standards regulate, and some GaN and SiC field effect transistors have already passed the Automotive Electronic Committee’s Q100 and Q101, the basic stress tests that guarantee a certain level of reliability acceptable to automakers. I expect in 2021 we will see them being used in more and more EVs. Pricing may be an issue at the beginning because WBG FETs individually are still more expensive than IGBTs or MOSFETs. However, WBG materials can lower overall costs due to the simplification of the surrounding circuitry. As EV brands compete to achieve longer range vehicles, demand will increase and with it will come a reduction in pricing.In the global power electronics semiconductor market, Nexperia, a spin off of NXP that is now Chinese-owned, makes up about 7-10% of the market, and it accounts for more than 13% of the MOSFET market. It is ranked number two globally for automotive grade MOSFETs behind Infineon. Huawei invested in Oriental Semiconductor, a MOSFET IDM, which to date has very limited market share.The purpose here is not to debate SiC vs. GaN, there are advantages and disadvantages to both, but to make clear that there is a Chinese-owned company, Nexperia, at the forefront of global EV power electronic semiconductors. Nexperia is head to head with famous global names in the industry such as TI, NXP, Infineon, ONSemi, and Rohm. I expect to see Nexperia grow in China along with the domestic EV industry.
Memory
Today’s cars use local memory primarily for infotainment and driver assistance. Automotive grade memory does not account for as much of the memory market as consumer electronics and telecommunications, but it is still a market worth around $10 billion—and growing. The smarter the car, the more memory it needs. Autonomous cars will have to make calculations really quickly, so they will need high-performance local memory.DRAM, NOR, NAND, and so on, are all memory types used in the industry, but of course must go through stringent testing and pass standards such as AEC-Q100 to be acceptable to automakers. All the usual suspects in memory ICs are prevalent here, Micron, Samsung, and Infineon (Cypress), as well as smaller companies like Macronix and Winbond.NOR is easier to develop. The market is dominated by Taiwanese companies like Macronix and Winbond, but there are also China mainland companies like Gigadevice doing well. Gigadevice’s overall memory market share is about 18%. It has also developed automotive grade products and is a majority shareholder of Changxin Memory Technologies (CXMT), a Hefei-based foundry specialized in DRAM chips. Through CXMT, Gigadevice has a route into the much larger DRAM market. Yangtze Memory Technologies (YMTC) is focused on NAND but has yet to produce an automotive grade product. I don’t think it should yet. It has a lot on its plate: Its consumer products are not yet a success, its production capacity is still lacking, and it is facing legal challenges from Micron over patent infringement. Its funder Tsinghua Unigroup has other problems it needs to deal with before expanding into even more new areas: In December it defaulted on $450 million of debt. DRAM is a more difficult but more rewarding design task; it makes up around half of the memory used in the automotive market. CXMT to date has no automotive grade DRAM product, so that leads us to Integrated Silicon Solutions (ISSI).ISSI is a US company headquartered in California. Its core competency is in DRAM, SRAM, and NOR flash. Automotive is one of its key markets, boasting customers such as Bosch, Delphi, and Continental. Back in 2015, Cypress Semi (now part of Infineon), looked to acquire ISSI to add DRAM as the last piece of its automotive semiconductor puzzle. Chinese investment vehicle Uphill Investment outbid Cypress and acquired ISSI. Fast forward four years and ISSI switched hands again when it was acquired by Chinese fabless company Ingenic in a RMB 7.2 billion deal. This was a somewhat strange deal, in that a small, relatively unsuccessful MIPs-based fabless CPU company acquired a much larger relatively successful US memory company. The deal passed CFIUS review, maybe because ISSI was already owned by a Chinese consortium since 2015. By contrast, Tsinghua Ungroup’s attempts to acquire Micron in 2015 were blocked. It is likely that ISSI was not considered as important, and the Committee felt that it couldn’t be seen to block every single tech deal. Like Nexperia, this ISSI acquisition gives China another route into DRAM, and also a route into automotive grade products and knowledge transfer of what is actually required to be successful in the industry.
CMOS image sensors
The use of complementary metal-oxide-semiconductors (CMOS) in the automotive area is driven by growth in autonomous driving applications. CMOS are a type of high-resolution imaging transistor that is used in most cameras, from DLSRs to smartphones. Autonomous cars will usually come with a mix of radar, lidar, and CMOS image censors (CIS) to cover all bases. CIS, for example, may not work well in low light conditions and to reach level 5 autonomous driving more and more sensors are needed on a vehicle. A car produced in 2021 may be loaded with 8 image sensors, and this number is only growing. In fact, although demand dropped over 2020 due to Covid-19 related externalities, there are now not enough CIS chips in the market to meet demand, and prices are going up over 40% (in Chinese).As with power electronics and memory, China’s leading image sensor company also came about through acquisition. Omnivision was originally acquired by a consortium of Chinese investment companies in 2015 and then by Chinese company Will Semiconductor in late 2018. The acquisition instantly made Will Semiconductor one of the most valuable Chinese semiconductor companies, which was hardly a household name before. Even today most people in the industry are more familiar with Omnivision than Will, and Omnivision’s headquarters are still in Santa Clara.In 2019, Omnivision accounted for around 10% of the global $19.3 billion CMOS sensor market. The same year, it was beaten into third place by Samsung with a 21% market share, and king of CMOS Sony with a 42% share. But when it comes to CMOS for the automotive sector specifically, Omnivision is doing better than Sony. It holds around 22% of the market, second only to US company ONSemi at 36%, Sony can only muster 10%. Technically, Omnivision’s products are just as good as ONSemi or Sony. All these companies offer similar 8.3MP front-view camera CMOS products for autonomous driving. Omnivision sells a lot of its products into European automotive OEMs and is well placed to grow in China as well, especially with demand outstripping supply.
Autonomous driving
You need a chip to process what your sensors are detecting and there are several Chinese startups specializing in this space. Rather than gaining momentum and market share via acquisitions, this area is characterized by established foreign players and local Chinese companies, and it’s highly competitive. Startups like Horizon Robotics and Black Sesame face competition not just from the likes of Huawei, with its MDC chip, but also from a whole host of foreign companies that are already more established automotive semiconductor suppliers. These established players have other revenue streams which means that they don’t just rely on the automotive market, or even this specific subsection of it. This allows them to grow into the market without having to burn through investor cash in the hope of future revenues.One might argue that these Chinese companies have an advantage domestically, but that isn’t necessarily the case. NIO announced last week that it will use Nvidia’s Orin system on a chip (SoC) in its automotive processor (ADAM), indicating that even Chinese carmakers might opt for foreign processors. SoCs are integrated circuits that combine all the main components of a computer; memory, processing, etc. NIO’s ADAM will use four Orin SoCs to push above the 1000 TOPS required for level-5 autonomy. At our company we have met with most of the automotive OEMs and “tier-1s”—direct suppliers to OEMs—in China on behalf of our clients. The vast majority are developing autonomous vehicles using foreign SoCs like Nvidia’s Orin. Others we usually come across include Nvidia Xavier, TI’s TDA4X, Japanese Renesas’s V3H, and Ambarella CV22. Sometimes Horizon and Huawei are mentioned, but Black Sesame is nowhere to be found. Based on my experience, even in China, American companies and Renesas are outperforming their local counterparts.This isn’t to say local companies have no hope. Huawei obviously will face problems supplying high-end autonomous driving SoCs if it continues to face export controls from the US, but I wouldn’t discount them yet. Horizon Robotics has already partnered with key tier-1s and some OEMs, including Audi. Its Journey 2 automotive AI processor is said to have shipped 100,000 units, and its level 3-capable Journey 3 is said to be going into mass production in Q3 2021. The company also has a clear roadmap to L5 for its future SoCs.
Conclusions
This is just a snapshot of a part of the industry I have had most contact with. China’s largest and most global players in the automotive chips sector came to be Chinese through acquisition. Some of these acquisitions may have struggled to go through in today’s climate, but the fact they were done earlier shows some foresight on these Chinese companies’ part. At the same time, in fields like autonomous driving, homegrown companies are rising. The acquired companies are in a good position to take advantage of the growing EV and AV industries, but the home grown companies may struggle to compete with the size and scale of their foreign counterparts.Nexperia, ISSI, and Omnivision have all kept their HQs in their respective home countries, but are concurrently operating strong R&D or manufacturing facilities in China—and in my experience Chinese owners are rarely hands off. ISSI and Omnivision have design teams in China, whereas Nexperia operates packaging R&D on the mainland. There is nothing nefarious about this, it is quite normal and makes sense. But technical know-how is transferred naturally as part of the work process, so even if these companies switch owners in the future I expect some skills and knowledge will have been transferred to Chinese employees.technode.comMoreTight chip supplies could linger into Q3Chip shortage dents VW output Follow us Scan the below "AutoUpdate" QR code , and stay up to date with Chinese automotive Industry