EU warns its chipmakers could lose market share in China

(Bloomberg) — The European Commission raises concerns that its chipmakers risk losing substantial market share in China as Beijing increases investment in the semiconductor industry and tries to achieve self-sufficiency in technologies. criticism.

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Netherlands-based NXP Semiconductors NV, Germany’s Infineon Technologies AG and Japanese chipmaker Renesas Electronics Corp. could be hit by China’s efforts to promote domestic rivals, according to people familiar with the matter and a European Commission report seen by Bloomberg News. While the companies don’t produce the industry’s most advanced semiconductors, like the processor used in Apple Inc.’s iPhone, they make microcontrollers and other chips critical to key sectors of the economy, including automobiles, industrial applications and consumer electronics.

“Discriminatory standards, local content requirements and other non-tariff barriers could be used (and are already being used) to encourage the growth of domestic MCU companies in China, which can leverage its vast EV market, to the detriment of Europeans. and Japanese. chip suppliers,” European officials wrote in the report that was prepared for a meeting between them and their counterparts from the US, Japan and South Korea earlier this week.

Microcontrollers, or MCUs, are effectively small computers on a single chip that usually control a single function within an electronic part, for example, activating an airbag in a car or controlling the water temperature in a washing machine. China already accounts for 30% of global MCU demand, the report said.

The Chinese government has quietly asked electric vehicle makers from BYD Co. to Geely Automobile Holdings Ltd. to dramatically increase their purchases from local auto chipmakers as part of a campaign to reduce dependence on Western imports and boost the industry. China’s semiconductor industry, Bloomberg News reported. earlier this year.

European chipmakers could also feel the impact of China’s heavy investments in capacity for components such as analog, discrete, mixed-signal and power semiconductors, according to the analysis.

China is on track to spend more than $100 billion to build new chip factories to make semiconductors needed for everything from household appliances to smartphones. Beijing sharply increased spending on domestic capacity after the U.S. imposed controls on Chinese companies’ ability to buy high-quality chips and the equipment to make them. The country is focused on legacy chips, which are less advanced and not subject to US restrictions, but where demand is still increasing due to the growth of the electric vehicle and renewable energy markets.

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Trade group SEMI predicts that China will have 41 chip factories online between 2023 and 2027, more than any other region in the world. This includes 34 fabs that will handle 300mm wafers and seven for 200mm wafers, where larger wafers allow companies to produce more chips.

Earlier this week, Chinese President Xi Jinping called on China to step up innovation as other countries dominate certain key technologies, including semiconductors, underscoring his country’s growing technological clash with the US.

Washington fears that Chinese chipmakers will gradually flood the global market with their products, as China has done in the solar and steel markets. American officials have raised these concerns with their European counterparts.

The European Union’s executive arm is reviewing the extent to which its businesses use mature or lower-end chips sourced from China, but its latest analysis concluded that concerns about Chinese chips systematically flooding the global market are “less likely to ” to become reality.

Demand is so high in China that any additional capacity will be absorbed by the domestic market until at least 2030, according to the report, citing in part data from Dutch equipment maker ASML Holding NV. Chinese foundries typically make chips exclusively for companies based there.

Chinese chipmakers could also reduce their capacity as they get into price wars with their domestic competitors due to oversupply, European officials wrote.

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