Chinese auto chips only: Inside Xi's self-sufficiency campaign
Government takes lead in developing semiconductor industry to rival U.S.
BEIJING -- As Xi Jinping begins his third term as president, China is accelerating efforts to bolster the country's chip sector -- starting with the automotive industry.
Xi packed key government posts with close allies at the recent National People's Congress, which concluded in Beijing on Monday. Boosting a sluggish economy and turning China into a technological power that rivals the U.S. are among their biggest concerns.
Remarks by auto industry insiders at the congress signaled Xi's plans for how.
"We must place more domestically produced chips in our vehicles," Feng Xingya, general manager of Guangzhou Automobile Group, said during a breakout session with other Guangdong province delegates. The automaker operates joint ventures with Toyota Motor and Honda Motor.
Zhu Huarong, chairman of Changan Automobile, a Mazda Motor partner, also urged better policies to promote innovation in semiconductors.
Back on Nov. 8, top auto executives nationwide were summoned to a secret meeting in Shanghai. A source familiar with the matter said they were told to switch completely to Chinese chips by Miao Wei, a former minister of industry and information technology and an influential former auto executive himself.
China's auto industry leads the world in both production and sales. A coordinated shift by its players could have a major effect on related businesses as well.
When the U.S. refers to competition, it means "to contain and suppress China in all respects and get the two countries locked in a zero-sum game," Chinese Foreign Minister Qin Gang said March 7 in his first news conference since taking office.
Hinting at the current U.S. curbs on advanced semiconductor exports to China, Qin said that "containment and suppression will not make America great, and it will not stop the rejuvenation of China."
China was less than 5% self-sufficient in auto-related semiconductors as of 2021, the China Association of Automobile Manufacturers reports. Though dependence on foreign chips is cause for concern, it also highlights the potential that Chinese manufacturers have for growth.
With many chipmakers struggling in the face of American curbs, it was natural for an increasingly powerful Xi administration to throw the government's support behind a sector it considers critical to national security.
On March 2, Xi ally and then-Vice Premier Liu He visited the Beijing plant of Semiconductor Manufacturing International Corp., China's top contract chipmaker.
Like SMIC, chip company Phytium Technology has been affected by the U.S. export controls.
China should overcome challenges by tapping its "new system concentrating nationwide effort and resources on key national undertakings," Guo Yufeng, Phytium's deputy general manager, said at the Chinese People's Political Consultative Conference -- a key gathering that coincided with the congress.
"The great rejuvenation of the Chinese nation has entered an irreversible historical process," Xi said in a Monday speech, hinting at the aim behind the recent developments. He called for greater efforts to increase China's self-reliance in science and technology.
Boosting domestic chip production is one of Xi's top policy goals. To do this, Xi has entrusted the task of "concentrating nationwide effort and resources" to Li Qiang, a member of his inner circle and the country's new premier.
Li is the former Communist Party chief for Shanghai, which is home to a thriving chip sector. Though he came under fire last year over the city's monthslong COVID-19 lockdown, industry insiders generally view him favorably.
"Thanks to him, we didn't need to completely halt our plant," an SMIC executive said.
Li severely restricted public life during the lockdown. But he granted exceptions to workers and shipments for SMIC in order to avoid disrupting China's chip production, especially amid a growing technological rivalry with Washington.
With Xi and the Communist Party taking more power into their hands, the world is watching how Li manages China's economy.
A novice in national politics, Li faces no shortage of challenges.
Since the end of 2022, speculation has grown that China will launch a package topping 1 trillion yuan ($146 billion) to support the chip industry. The supposed five-year plan, believed to include subsidies and tax breaks, would dwarf the U.S. incentives put in place by President Joe Biden's administration.
Some seem to think this is not enough. "One trillion yuan sounds like they're not taking us seriously enough," Tsinghua University microelectronics professor Wei Shaojun said at an industry group meeting.
Shanghai and Beijing, as well as Guangdong and Zhejiang provinces, are already preparing large-scale local subsidies for chipmaking. But establishing competitive production hubs also involves securing cutting-edge equipment and technology -- a major test for Li's abilities.
Meanwhile, China's position as the world's factory is wavering. Xi's campaign to turn China into a leading technological power could falter if the country no longer makes the products used by its domestically produced chips.
Hon Hai Precision Industry's once bustling plant in Zhengzhou appeared unusually quiet during a visit in February. At its peak, around 500,000 workers assembled iPhones for Apple there. But "the figure is down to around 100,000 to 200,000," said one former employee of the Taiwanese contract manufacturer known as Foxconn.
"They're not looking for new workers now," he said.