Chinese carmakers boost local chip demand to enhance self-reliance

China’s largest automakers are doing something that would have seemed wildly ambitious just a few years ago: building cars with zero foreign chips. BYD, Geely, SAIC Motor, Changan, Great Wall Motor, and Li Auto are all developing vehicle models designed to run entirely on domestically produced semiconductors, with at least two manufacturers targeting mass production as early as 2026.

The effort is backed by a government mandate that has grown considerably more aggressive. China’s Ministry of Industry and Information Technology originally set a target of 25% domestic chip sourcing by 2025. That number has been revised upward, dramatically, to 100% domestically developed automotive chips by 2027.

Why cars need so many chips now

A traditional internal combustion engine vehicle uses roughly 600 to 700 semiconductor chips. An EV requires about 1,600.

The push for domestic sourcing isn’t happening in a vacuum. US export controls on advanced semiconductors have made it increasingly difficult for Chinese companies to access cutting-edge chips, particularly those designed for artificial intelligence and autonomous driving applications.

The domestic alternatives taking shape

Two names keep surfacing as the primary beneficiaries of this shift: Huawei and Horizon Robotics.

Huawei, already a dominant force in Chinese telecommunications despite years of US sanctions, has been expanding aggressively into automotive chips. The company’s HiSilicon division produces processors that are increasingly finding their way into vehicle platforms from multiple Chinese automakers.

Horizon Robotics, meanwhile, has positioned itself as a direct competitor to Nvidia in the autonomous driving chip space.

What this means for the global semiconductor landscape

Nvidia, which dominates the global market for AI and autonomous driving chips, faces a particularly interesting situation. US export controls already limit what Nvidia can sell to Chinese customers. Now, even the chips that could theoretically be exported face competition from domestic alternatives that Chinese automakers are being incentivized, and in some cases required, to adopt.

Companies like Horizon Robotics, which went public in Hong Kong in late 2024, offer direct exposure to this trend.

Traditional automotive chip suppliers in Europe and Japan, companies like Infineon, NXP, and Renesas, also face potential headwinds. These firms have built substantial businesses selling into the Chinese auto market.

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