"China for China" gains momentum among European tech companies
Geopolitical dynamics are accelerating the formation of the “China for China” supply chain, driven by China’s vast domestic market. This trend is particularly evident in the automotive sector, says TrendForce pointing to its latest research.
The Chinese government aims for domestic automakers to increase the adoption of locally manufactured chips to 25% by 2025 – while encouraging foreign companies to localise production. In response, key European automotive chip suppliers like STMicroelectronics, Infineon, NXP, and Japanese Renesas have been forging partnerships with Chinese foundries such as SMIC and HHGrace to expedite the development of diverse platforms.
As pointed out by TrendForce, Chinese foundries have historically faced hurdles in securing automotive MCU outsourcing orders from IDMs due to slower advancements in eFlash/eNVM manufacturing processes and the rigorous automotive-grade and OEM verification requirements processes.
However, rising geopolitical tensions and the emergence of cost-effective EV models in China have pushed automotive suppliers to focus on cost optimisation. This shift, coupled with the “China for China” approach, has created new opportunities for European and Japanese IDMs to collaborate with these foundries.
STMicroelectronics has, as previously reported, launched a joint venture between Hunan Sanan in China – and now also formed a partnership with HHGrace to develop 40nm industrial/automotive-grade MCUs. Mass production is, according to TrendForce, slated to start in late 2025 – if development progresses smoothly.
Meanwhile, in 2024, Renesas and Infineon started talking with Chinese foundries regarding contract manufacturing partnerships. NXP has also revealed ambitions to set up a supply chain in China. While there are no imminent plans to establish a local manufacturing plant, discussions with Chinese foundries regarding contract manufacturing are said to be ongoing.
For overseas foundries operating in China, the capacity to support clients in moving products across platforms and manufacturing sites to meet localisation standards presents both potential and major hurdles. Price competition with local Chinese foundries remains fierce, adding pressure to maintain profitability, TrendForce reports.
The market intelligence firm highlights that while IDMs and Chinese foundries are working to build partnerships in the automotive and industrial control chips sectors, these products face much stricter validation and certification requirements than consumer chips. Therefore, TrendForce predicts that IDM-manufactured products under the "China for China" strategy will begin mass production in the second half of 2025. By 2026, these collaborations are expected to grow further, strengthening their impact.
