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China Semiconductor Market for Automotive by Component (Microcontroller, Power Semiconductor, Sensor & MEMS Device, Memory Chip, Analog & Mixed Signal IC), Global & China Semiconductor Export, Alternate Destination - Trends and Strategic Recommendation
The surging demand for semiconductors in the Chinese automotive sector is primarily driven by the rapid adoption of advanced driver assistance systems (ADAS), electric vehicles (EVs), and connected car technologies. These innovations require more sophisticated chips to improve safety, automation, and connectivity. However, China’s heavy reliance on Taiwan for semiconductor supply has increased geopolitical risks and vulnerabilities in the supply chain. In response, leading chipmakers like TSMC are investing in new manufacturing facilities in the United States, Japan, and Europe, supported by government incentives. Additionally, automotive OEMs are increasingly requiring suppliers to ensure geographic redundancy in their production capabilities. This strategic diversification is reshaping global supply chains and reinforcing the resilience of the automotive sector.
Attractive Opportunities in the China Semiconductor Market
CHINA
By 2025, China's automotive semiconductor industry is expected to experience rapid growth and significant transformation, largely due to its status as the world's largest electric vehicle market and strong government support for achieving chip self-sufficiency. The government has established ambitious goals, requiring domestic automakers to source more than 20% of their chips locally by 2025.
China's ADAS sensor manufacturing sector is experiencing rapid growth, fueled by the government's "China Manufacturing 2025" initiative and the high demand for autonomous driving capabilities.
The emphasis on 12-inch wafer processing in China will create a new revenue stream for major manufacturers.
Rising integration of advanced electrical/electronic architecture, 5G connectivity, and software-defined vehicle features in new vehicles in China is driving the market.
The increasing demand for domestic automotive power semiconductors, especially IGBTs and MOSFETs, is driven by the need for EVs in China.
Global China Semiconductor Market Dynamics
DRIVER: Increased domestic investments in semiconductors
Domestic manufacturers in China are quickly advancing the semiconductor market by increasing investments and expanding production capabilities, especially in response to the rising demand for chips in the automotive sector. These chips are crucial for ADAS, EVs, and connected car technologies. Key players like SMIC and Hua Hong Semiconductor have significantly raised their capital expenditures. A notable investment includes the establishment of a government-backed National IC Industry Investment Fund in May 2024, totaling 344 billion yuan (USD 47 billion). This fund is the largest to date and aims to boost localization and reduce dependence on foreign suppliers. Additionally, companies such as Yangtze Memory Technology Corp (YMTC) and ChangXin Memory Technologies (CXMT) are expanding their production lines. Emerging startups are also securing considerable venture capital for innovations in chip design and materials. The Chinese government supports local manufacturers with substantial funding, favorable policies, and initiatives like “Made in China 2025,” which targets 70% domestic content in core materials by 2025 and aims for complete import substitution by 2030. Recent regulations and government directives, including the dual circulation strategy and indigenous innovation policy, further encourage investments in domestic semiconductor manufacturing and technology development. These combined efforts are rapidly strengthening China’s automotive semiconductor ecosystem, ensuring that the growing demand for next-generation vehicles is met by locally controlled supply chains.
RESTRAINT: Shortage of manufacturing facilities for 12 mm machines
China’s semiconductor manufacturing industry is currently limited by its inability to produce advanced tools and materials necessary for processing 12-inch (300 mm) silicon wafers, which are essential for high-volume and cost-effective chip production. This is especially critical for power-intensive applications like electric and autonomous vehicles, which depend on advanced logic, power management, and sensor chips. Despite significant investments, such as Hua Hong Wuxi’s USD 10 billion Phase II expansion (which became operational on December 10, 2024), SMIC’s plan to add 60,000 wafers per month by the end of 2024, and new 12-inch lines from Runpeng Semiconductor, China continues to rely on foreign suppliers for crucial lithography and wafer fabrication equipment. The main suppliers are from the US, Europe, and Japan, which are restricting exports due to geopolitical and national security concerns. These export controls, including US restrictions on ASML’s EUV lithography tools, aim to limit China’s technological advancement and prevent its military and strategic industries from accessing cutting-edge capabilities. This reflects broader concerns about technology leakage, human rights, and regional security. As a result, while China has rapidly expanded its capacity for mature-node production (14 nm and above)—with companies like SMIC and Nexchip scaling to 100,000 wafers per month at 55 nm and 40 nm nodes, and Huahong focusing on automotive chips—its inability to manufacture or acquire the most advanced wafer processing equipment poses a significant hurdle. This limitation affects China’s competitiveness in leading-edge nodes and restricts growth for wafer thicknesses below 12 inches.
OPPORTUNITY: Substantial investments by <12-inch wafer manufacturers
China’s semiconductor manufacturing industry is experiencing significant investment in facilities that produce wafers smaller than 12 inches (the industry typically refers to 8-inch/200 mm and 6-inch/150 mm wafers as “below 12-inch”). This investment surge is fueled by a combination of supportive government policies, strong domestic demand, and increasing interest from foreign investors. The Chinese government has made substantial financial commitments to this sector, exemplified by the launch of the third phase of the National IC Industry Investment Fund in May 2024, which injected USD 47.5 billion to enhance local chip production. Alongside this funding, the government is offering tax incentives, land subsidies, and research and development credits aimed at fostering a resilient supply chain and reducing reliance on foreign technology. At the same time, China’s luxury and high-end vehicle market is rapidly expanding. In 2025, the market size is estimated to reach USD 159.7 billion. Luxury brands such as BMW, Mercedes-Benz, and Lexus are introducing advanced models equipped with cutting-edge technology, autonomous features, and premium infotainment systems—all of which necessitate a growing number of sophisticated semiconductors. This rising demand for luxury vehicles has consequently increased the need for advanced chips manufactured on sub-12-inch wafers, which are critical for complex automotive applications like advanced driver assistance, connectivity, and energy management. Recognizing these prospects, foreign investors are increasingly directing capital into China’s semiconductor sector. This is evident from the joint ventures and technology partnerships announced throughout 2023–2024, including collaborations with global automotive and semiconductor companies to establish new fabrication plants and design centers. This positions the country as a crucial hub for next-generation vehicle electronics.
CHALLENGE: Technological gap and heavy dependence on imported equipment
China’s semiconductor industry is currently dealing with a complex landscape characterized by several challenges. These include a technological gap in advanced manufacturing processes, a heavy dependence on imported equipment, particularly lithography tools from companies like Advanced Semiconductor Materials Lithography, and geopolitical tensions that restrict access to essential foreign technologies. Despite significant government investments, such as the launch of the third National IC Industry Investment Fund in May 2024, which amounts to over USD 47 billion, Chinese companies continue to rely on external suppliers for advanced metrology, coating, and lithography equipment. Export controls from the US and allied countries, including the Netherlands’ restrictions on extreme ultraviolet (EUV) lithography machines, severely limit China’s ability to produce cutting-edge chips at scale. Companies like SMIC and Huawei are advancing with more expensive and less efficient processes to manufacture high-end chips. However, they face low yields and significant economic challenges due to these restrictions. According to a whitepaper published by the GIP Digital Watch Observatory in February 2025, it is projected that China’s semiconductor equipment purchases will decline by 6% in 2025, dropping from USD 41 billion in 2024 to USD 38 billion in 2025, as overcapacity and tightening US sanctions come into effect. US tariffs and export controls, alongside broader technology-related confrontations, continue to influence the trajectory of the sector. This situation compels China to prioritize self-sufficiency and indigenous innovation while creating new uncertainties for global supply chains and foreign investment in the industry.
Global China Semiconductor Market Ecosystem Analysis
The Chinese automotive semiconductor market companies have the latest technologies, diversified portfolios, and global distribution networks. The major players in the China semiconductor market for automotive include SMIC (SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORPORATION), GigaDevice Semiconductor Inc., Novosense Microelectronics, Silan Microelectronics, and HiSilicon.
Note: The above diagram only shows the representation of the web content management market ecosystem; it is not limited to the companies represented above.
Source: Secondary Research and MarketsandMarkets Analysis
Recent Developments of China Semiconductor Market
FAW Group and Tsinghua Unigroup have established a strategic partnership aimed at creating a robust, automotive-grade chip ecosystem in China. Announced in May 2025, the collaboration encompasses chip design, wafer fabrication, packaging and testing, application selection, and integrated system solutions. The partnership seeks to enhance cooperation in domestic chip applications, supply chain development, joint R&D, and market-driven initiatives, leveraging the strengths of each party to improve supply-demand alignment and industrial synergy. Through joint projects, technological breakthroughs, and capital collaboration, FAW and Tsinghua Unigroup strive to set a benchmark for “chip + automotive” industry cooperation and foster innovation in China’s automotive semiconductor sector.
United Nova Technology (UNT) and GAC AION, a prominent new energy vehicle manufacturer under GAC Group, have established a joint laboratory focused on the research, development, and design of next-generation automotive semiconductor chips and modules. This partnership, formalized on January 2, 2025, signifies a deepening of their collaboration from prior commercial agreements to joint R&D, encompassing process design, manufacturing, and end-use applications. The lab seeks to strengthen the automotive semiconductor supply chain, accelerate innovation, and address key challenges in automotive-grade power semiconductors, facilitating the transition to smart electric vehicles and improving vehicle performance and energy efficiency.
In April 2025, Black Sesame Technologies showcased a chip platform that integrates CPU, DSP, GPU, NPU, MCU, ISP, and CV units at the 2025 Shanghai Auto Show. Manufactured using a 7nm process, it boasts single-chip computing power exceeding 250+ TOPS for next-gen autonomous driving.
In April 2025, Black Sesame Technologies showcased a cross-domain fusion chip family at the 2025 Shanghai Auto Show. This technology addresses safety and cost challenges by providing hardware-level security isolation and expanding platform-based computing power. It has already been recognized by international OEMs and is entering mass production.
Key Market Players
List of Top China Semiconductor Market Companies
The China Semiconductor Market is dominated by a few major players that have a wide regional presence. The major players in the China Semiconductor Market are
Who are the top players in China’s automotive semiconductor market?
The major players include SMIC (SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORPORATION), GigaDevice Semiconductor Inc., Novosense Microelectronics, Silan Microelectronics, and HiSilicon.
What are the trends for the automotive semiconductor industry in China?
The automotive sector and the Internet of Things (IoT) are significant drivers of demand, largely due to the growth of EVs, autonomous driving technologies, and smart city initiatives. The amount of semiconductors used in vehicles is increasing rapidly. Recent collaborations, such as those between United Nova Technology and GAC AION, as well as FAW Group and Tsinghua Unigroup, are focused on the research and development of automotive-grade chips and the integration of supply chains.
Which are the most prominent factors driving the automotive semiconductor industry in China?
Government support and self-sufficiency goals
Technological advancements
Rise in electric and autonomous vehicles
What are the challenges faced by the automotive semiconductor industry in China?
Geopolitical restrictions and export controls
Technology and talent gaps
Supply chain fragmentation and security
Market adjustment and investment slowdown
Which is the largest market for the semiconductor industry in China?
China’s semiconductor automotive industry holds the largest market for microcontrollers, followed by power semiconductors (IGBTS, MOSFETS).
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Growth opportunities and latent adjacency in China Semiconductor Market