Reshaping the Global Automotive Chip Supply Chain

Entering 2026, the global landscape of the automotive chip sector has undergone profound changes. In previous years, due to black-swan events and a complex international situation, the automotive chip market experienced a global shortage that triggered over-ordering. As capacity surged afterward, destocking became the industry consensus – yet structural divergence is clear: inventories of general-purpose chips remain high, while demand for high-end chips in new energy vehicles remains robust.

The Era of Effortless Foreign Dominance Is Over

The performance of international chip giants speaks for itself: STMicroelectronics’ Q3 2025 revenue was $3.187 billion, down 1.85% year-over-year; net profit was $237 million, down 32.3%. NXP’s Q3 revenue was $3.173 billion, down 2.37% year-over-year; net profit was $631 million, down 12%. Intel, which entered the automotive chip track as early as 1976, chose to divest the related business in 2025.

In contrast, domestic companies have delivered impressive results: BYD’s IGBT chip installations have surpassed those of incumbent player Infineon, securing the No.1 position in the domestic market; Horizon Robotics, Huawei Ascend, and Black Sesame Technologies have established a foothold in the intelligent driving chip market; and automotive-grade MCUs are blooming across the board.

In-House Chip Development Becomes a Consensus Among OEMs

Automakers are also embarking on the path of in-house chip development. Tesla is a flag-bearer, with the design of its AI5 chip essentially complete and a target design cycle of nine months. Domestic automakers are equally active: BYD Semiconductor is involved in multiple automotive-grade chips such as MCU, SiC, and IGBT; its latest intelligent-driving chip, BYD9000, adopts a 4nm process; and Xpeng’s Turing, NIO’s Shenji, and Li Auto’s M100 each staking their claims.

There are four driving factors behind in-house chip development:

1. Mastering core competitiveness: In the era of intelligent driving, chips and algorithms have become core competitiveness; in-house chips can be deeply coupled with a company’s own algorithms to deliver maximum performance.
2. Meeting differentiated needs: Automakers have the deepest understanding of differentiation; in-house chips deliver better results in less time.
3. Driving cost reduction and efficiency: NIO’s Shenji NX9031 can reduce per-vehicle cost by about 10,000 yuan – one chip replacing four.
4. Expanding the profit curve: In-house chips can be licensed or sold externally; Xpeng’s Turing AI chip has already won a volume-production nomination from Volkswagen.

Challenges Facing Domestic Substitution

Despite remarkable achievements, domestic substitution still faces severe challenges. Foreign companies still firmly dominate most of the high-end automotive chip market, and the technology gap of Chinese companies remains significant. An efficient closed loop has yet to form among chip design, wafer manufacturing, packaging & testing, and vehicle application. The chip industry is one of “high investment, long cycles, and high cost,” and crossing the ecosystem wall built by overseas chips over decades will require sustained effort.

According to a Market.us report, the global automotive chip market is expected to grow from $48.5 billion in 2024 to $187.8 billion in 2034, with a CAGR as high as 14.5%. Facing such a massive market opportunity, Chinese chip vendors need to fully leverage their localized scenario-definition capabilities, build differentiated competitiveness through software-hardware coordination, and achieve a leap from point innovation to full-domain innovation.

As a deep practitioner in automotive-grade chip distribution, Honchak Electronics will continue to monitor the latest developments in the automotive chip supply chain and provide customers with professional support from selection to delivery.