In the latest news, supply chain sources said that some Chinese automakers are considering expanding their use of non-automotive-grade commercial chips to replace automotive-grade chips. The current use of semiconductor products in automobiles is expanding rapidly, with a severe shortage of automotive chips at the time of the 2021 epidemic, and a gradual easing of the supply-demand imbalance since 2023. However, the sources warned that the automotive industry in 2024 could still face the challenges posed by the chip market disruption.

The sources said in the fourth quarter of 2023, some automakers are considering adopting more consumer-grade or commercial-grade chips instead of vehicle-grade chips, mainly due to cost considerations. Some unimportant systems, such as DDI driver chips used in in-car entertainment systems and displays, can be replaced with non-vehicle-grade chips as they do not affect driving safety.

But Chinese automakers are considering further replacements for chips that could affect driving, such as those used in advanced driver assistance systems (ADAS), the sources said.

Foundries, including TSMC, UMC, Powerchip and World Advanced, have been unable to accurately categorise their chip production by end-market, as some customers have not disclosed whether their chips will be used in the automotive industry, the supply chain said. For the foreseeable future, it is expected that China's automotive manufacturing industry will continue to use a mix of automotive-grade, general commercial-grade and industrial-grade chips, which is already a fairly common practice. However, it remains to be seen whether the strategy will also be adopted by Chinese manufacturers for their overseas-facing models.

According to the German Centre for Automotive Management, nearly 10 million all-electric vehicles will be sold globally in 2023, with about 6 million of them coming from China. Electric and self-driving cars, it is learnt, require up to 1,300 chips each, while fuel cars only need about 500 chips.