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China wants to allow self-driving cars but needs countless chips from Taiwan to do so

By Jeff Pao

The Chinese government has started a one-month public consultation for a national law allowing driverless cars to run on roads and defining the legal responsibility when traffic accidents happen.

The Ministry of Transport released a set of guidelines on Monday (August 8) that encourages the use of self-driving cars for taxi services under certain conditions. The public consultation on the guidelines will end on September 7.

Shares of automobile part suppliers, particularly makers of driver assistance systems, surged on Tuesday on the news. Shenzhen-listed Zhengzhou Tiamaes rose 20% to 28.94 yuan (US$4.29), while Shanghai-listed Harbin VITI Electronic increased 4% to 4.98 yuan.

China wants to allow self-driving cars but needs countless chips from Taiwan to do so. (Photo internet reproduction)
China wants to allow self-driving cars but needs countless chips from Taiwan to do so. (Photo internet reproduction)

However, some analysts pointed out that many automakers were suffering from chip shortages as an e-vehicle can use up to 300 micro-controllers (MCU), most of which are produced in Taiwan.

They said such a situation could worsen if the net effect of the Chips and Science Act, signed by US President Joe Biden on Tuesday, is to discourage chip makers from building new fabs in mainland China.

Self-driving vehicle makers worldwide have actively promoted their products while struggling to meet safety requirements. In the US, significant players include Ford, General Motors, and Tesla – some using Google Maps and others developing their own navigation systems.

In China, key related brands include Baidu’s Apollo,, Xpeng, Alibaba’s AutoX, Nio, and BYD.

According to the US National Highway Traffic Safety Administration, about 400 crashes involving fully or partially self-driving cars were recorded in the US between July 2021 and May 2022. Almost three-quarters of the high-tech vehicles were made by Tesla.

On August 12 last year, a 31-year-old man who operated a restaurant chain in Shanghai was killed when riding in a Nio ES8 in partial self-driving mode in the southeastern Fujian province.

On June 22 this year, two testing staff members died in a Nio autonomous car after it fell from the third floor of an office building onto the ground floor in Shanghai.

According to the new Ministry of Transport guidelines, self-driving vehicles will soon be allowed to serve as buses on dedicated routes.

Still, they will not be allowed to carry dangerous goods. More highly autonomous cars are required to have backup drivers. Remote drivers or safety officers are needed for fully autonomous vehicles.

Even before a national law that regulates self-driving cars was passed, some Chinese cities have permitted so-called “robotaxis” to run on roads.

On August 1, a set of new rules that regulate the commercial use of intelligent automobiles took effect in Shenzhen. The regulation has become the first of its kind to be implemented in a Chinese city.

Chongqing and Wuhan also unveiled trial schemes for driverless car service providers to begin their commercial operations. Baidu’s Apollo said it had been testing its robotaxis on roads and would apply for permission to start the services as soon as possible.

By 2030, China’s ride-hailing market is expected to have grown by 20-28% annually to reach 2.25 trillion yuan (US$334 billion), 60% of which will be served by robotaxis, according to a report released by IHS Markit last year.

The report predicted two to three robotaxi operators would dominate the market in mainland China. At the same time, Baidu, an internet giant specializing in search engines and maps, would benefit from a first-mover advantage.

Ronnie Ho, an analyst at CCB International, wrote in a report:

Software has become a vital ingredient for automakers driving profitable growth as the industry advances in autonomous driving. We believe leading automakers will keep their fundamental software development in-house, particularly in the case of operating systems, which play a central role in smart vehicle ecosystems.

However, chip shortages remain the biggest challenge for China’s automakers.

A Chinese columnist wrote in an article on Monday that the United States’ newly-passed Chips and Science Act could limit Chinese automobile makers’ output in the next five years. He wrote an electric vehicle could use up to 300 MCU chips – and Taiwan’s TSMC supplies 60-70% of these chips globally.

He noted that the manufacturing of MCU chips does not require the most cutting-edge technology, as it only uses 16 to 40 nanometer (nm) chips, some of which can be made by Chinese chip makers. But he said the supply of these chips would remain a bottleneck for the sector’s growth as Chinese automakers tend to use Taiwanese chips to ensure driver safety.

Many so-called Chinese-made chips involve Taiwanese technology, he noted.

The writer added that TSMC co-developed some 16-nm and 28-nm chips for Horizon Robotics, a Beijing-based auto chip maker, and also produced the Chinese firm’s 14-nm chips, namely Journey 5. He said the two companies plan to extend their partnership to 7-nm chips.

On Tuesday, Biden signed the Chips and Science Act to boost domestic semiconductor production and scientific research to enhance US competitiveness vis-a-vis China. The new law grants US-based chip makers US$54 billion of subsidies and tax benefits over the next five years.

The law forbids recipients of federal incentive funds to expand or newly build manufacturing capacity for certain advanced semiconductors in specific countries that present national security threats to the US, i.e., China.

It is likely that TSMC, which has production lines in Arizona in the US, will face difficulty if it has to choose between America and mainland China.

State media, including China Central TV, criticized the US Congress for introducing a bill that purposefully obstructs regular technological cooperation between the US and China.

The reports said the US is hypocritical as it claims to be promoting a free market but forces semiconductor makers to take sides and shun mainland China in practice.

Follow Jeff Pao on Twitter at @jeffpao3.

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