Recently, BLACK SESAME, an automobile chip company, officially launched a charge to HKEX. If it is successful complete the Initial Public Offerings (IPO), it will become the first Hong Kong-listed company in the domestic automotive chip sector. Not long ago, another automotive chip company, Xinyuan Microelectronics, made a sprint towards the STAR Market. Looking across the country, one can see that the entire automotive chip sector is on a flourishing path of development."
The trend of automobile intelligence is coming, and the value of chips is highlighted
In the field of new energy vehicles, the trend of electrification, digitalization and intelligence has reached a consensus, but the value of "computing" in the new energy vehicle industry has been controversial. At present, the value of digitalization and intelligence brought by cloud computing in new energy vehicles has become increasingly prominent, his is specifically manifested in the growing number of chips on vehicles, increasing computing power, and a proportionally larger contribution to overall value.
Figure1: Intelligence of Black Sesame
According to a report of FROST&SULLIVAN, a new energy vehicle uses more than 1,500 chips on average, which is twice that of traditional fuel vehicles. Moreover, the computing power of chips in new energy vehicles is rapidly increasing, and the value contribution of chips to the overall vehicle is gradually rising. Currently, chips account for 5%-8% of the total vehicle cost.
In this great change of global automobile industry, China is undoubtedly leading. At present, China has become the largest and fastest growing new energy vehicle market in the world, accounting for 64.8% of the global market in terms of automobile sales. China not only has a huge market for new energy vehicles, but also has achieved remarkable results in localization. 80% of the new energy vehicles sold in China in 2022 will come from domestic automobile manufacturers. However, in sharp contrast to the excellent situation of domestic new energy vehicles, most domestic new energy vehicles are not equipped with domestic chips.
China Automotive Chip Corps, Fighting NVIDIA
FROST&SULLIVAN counted the market share of the global high-computing power (computing power greater than 50Tops) self-driving SoC chips in 2022: in the Chinese market, more than 80% of self-driving chips come from NVIDIA; Domestic chip such as HORIZON accounts for 6.7%, BLACK SESAME accounts for 5.2%, HUAWEI HISILICON accounts for 0.7%, and the three companies account for 12.6% in total, which is about 15% of NVIDIA in total.
Figure2: The 2022 computility autopilot SoC shipments ranks of global and China
According to the prospectus of BLACK SESAME, its revenue in 2022 was 165 million yuan and its operating loss were 1.053 billion yuan; The net loss attributable to shareholders is 2,753.9 million yuan. By comparison, NVIDIA's revenue in 2022 was US $26.97 billion and its net profit was US $4.368 billion. Of course, automotive chips only account for a small part of NVIDIA's revenue, but its GPU has strong applicability in the field of automotive chips, and its huge volume will bring great advantages in R&D investment and customer resources.
It should be pointed out that in addition to HORIZON, BLACK SESAME and HUAWEI HISILICON, which account for a high market share, domestic manufacturers include startups such as CAMBRICON, CHIP-LITE, HOUMOAI and SEMIDRIVE, auto manufacturers such as BYD and LEAPMOTOR, and Internet manufacturers such as BAIDU.
In addition, according to the statistics of the Standards Working Group of China Automotive Chip Industry Innovation Strategic Alliance, more than 100 domestic enterprises are engaged in the development and production of automotive chips, and more than 50 listed chip companies claim to have automotive grade products or mass production applications. It can be said that although domestic manufacturers can't compete with NVIDIA in market share, they have formed a huge automobile chip system.
Three major difficulties faced by domestic automobile chips
For domestic automotive chip manufacturers, if they want to catch up with international corporate titans like NVIDIA, the key to success or failure lies in crossing the "three mountains": performance barriers, advanced chip manufacturing processes and software and hardware ecology. It can be found from the table that there is still a huge gap between domestic manufacturers such as HORIZON, BLACK SESAME and HUAWEI HISILICON and NVIDIA in terms of computing power and manufacturing process.
Figure3: Different computility of different vehicle car chip manufacture
One of the core indicators of automobile chips is computing power. The greater the computing power, the stronger its performance. With the improvement of automobile intelligence, the amount of data to be processed is increasing, and the demand for chip computing power is also increasing synchronously. The higher the computing power, the stronger the competitiveness. At the same time, the process of chip manufacturing is also crucial to improve computing power, and the same chip is much stronger at 4nm than at 16nm.
In addition to computing performance and chip process, there is also a very important but easily overlooked factor, that is, the software and hardware ecology matched with the chip. Or it can be said that the construction of software and hardware ecology is the biggest competitive barrier for chip manufacturers. The WINTEL alliance built by INTEL and Microsoft is a typical example. Microsoft's operating system is highly adapted to Intel chips, and millions of applications and tens of millions of developers are on top of the operating system. It may be easy to match Intel's chip performance, but it is difficult to shake the ecosystem built by tens of millions of developers and tens of millions of applications.
In the field of automotive chips, NVIDIA has established a solid competition barrier through the deep integration of software and hardware and the construction of ecosystem. Technological innovation is the core. Relying on deep GPU technology accumulation, they developed a Drive platform integrating various AI algorithms to support various functions of autonomous vehicles.
In addition, NVIDIA has established close cooperative relations with major automobile manufacturers, parts suppliers and software developers around the world, forming a complete ecosystem. They also actively participated in the formulation of relevant standards in the automobile industry, and launched the Safety Force Field (SFF), a computing framework for verifying the safety of automatic driving systems. These strategies make NVIDIA form a unique competitive advantage in the field of automotive chips. Therefore, domestic automobile chip manufacturers have a long way to go in terms of chip computing power, manufacturing process and ecological construction.
New energy automobile industry of China needs domestic chips to build a moat
The growth of domestic automobile manufacturers not only drives the rise of domestic chip industry, but also guards the safety of the larger domestic new energy automobile industry. China's new energy automobile industry is rising strongly, not only occupying 80% of the domestic market, but also gradually moving towards the world. At present, China has surpassed Japan and become the largest automobile exporter in the world. According to the data of China Association of Automobile Manufacturers, in the first half of this year, the production and sales of new energy vehicles in China reached 3.788 million and 3.747 million, up 42.4% and 44.1% respectively, and 534,000 new energy vehicles were exported, up 160% year-on-year.
Figure4: China’s automobile export volume and growth rate in the past ten years
In this excellent situation, there is a huge hidden danger-most of China's new energy vehicles and chips depend on imports. Most of China's car chips, especially high-end chips, come from foreign corporate titan such as NVIDIA, INTEL and QUALCOMM, which will bring huge risks.
Although chips account for less than 10% of the value of the whole car, if a car does not have chips, the loss is 100%. In 2022, the global automobile market experienced a serious chip shortage time. It is estimated that due to the "lack of core", the global automobile production will be reduced by more than 4 million vehicles in 2022. For China's automobile industry, the risk brought by lack of core is particularly serious. Chinese enterprises not only face the market risks brought by the fluctuation of global industrial chain, but also face the risk that chips were sanctioned.
If China's new energy automobile industry is based on the supply of American chip companies, in extreme cases, automobile chips are likely to become a handle to clamp down on China's new energy industry. One situation is that the supply is completely cut off, which will plunge China's booming new energy automobile industry into a state of stagnation instantly. However, it is more likely that the supply will not be completely cut off, but the quality of chip will be limited.
NVIDIA's high-end chips A100, H100 and other products can no longer be exported to China, and Chinese enterprises can only obtain chips of the backward generation. In addition, for example, HUAWEI can obtain QUALCOOM chips, but it can only obtain QUALCOOM 4G chips instead of 5G chips, which leads to HUAWEI only selling 4G mobile phones in the 5G era.
The intelligent degree of automobile depends heavily on the computing power level of automobile chips. Taking automatic driving as an example, if the computing power of chips is not enough, the corresponding automatic driving ability cannot be meet. Assuming a situation, the computing power of the world's most advanced chips reaches thousands of TOPS, which can effectively support automatic driving above L4. However, Chinese automobile companies can only get automobile chips with computing power below thousands of TOPS, and their automatic driving ability is limited below L3. In this case, automobile chips are like the Sophon of China's automobile industry, and consolidate the capabilities of Chinese automobile enterprises.
Figure5: Chip computility required for different autonomous driving levels
To break this deadlock, we need not only the continuous efforts of automobile chip companies such as HORIZON and BLACKSESAME, but also the cooperation of terminal automobile companies such as BYD, NIO, LI Auto, XPENG Motors, BAIC and SAIC, as well as automobile OEM, sensor manufacturers and automobile software developers, to prosper the domestic automobile software and hardware ecosystem.
Happily, some achievements have been made so far. Taking BLACK SESAME as an example, the number of its customers has increased from 33 in 2020 to 45 in 2021 and then to 89 in 2022. Obtained 15 model intention orders from 10 automobile OEM and first-class suppliers, and cooperated with more than 30 automobile OEM and first-class suppliers, including FAW, DONGFENG, JAC, BAIDU and other corporate giants.
Performance of HORIZON is even better. Its Journey series chips have won fixed-point cooperation from more than 20 car companies, fixed-point front loading of 120 models, and more than 50 mass-produced models, including CHANGAN, CHERY, GAC-TOYOTA, LI Auto, SAIC, BYD, NETA Auto and other terminal car companies. The overall shipment of Journey series chips has reached 2.8 million pieces.
New Energy Vehicle Chips: China's Manufacturing Builds a Moat for the Automotive Industry-China.exportsemi.com
