The Chinese government has asked domestic Electronic Vehicle (EV) companies to increase spending with local chipmakers. This is an effort to reduce dependence on American chipmakers.
The directive, according to a Bloomberg report, was issued by China’s Ministry of Industry and Information Technology.
This strategy of buying from Chinese companies, both by consumers and also by Chinese manufacturers, is hurting US companies competing against Chinese companies in China. Chinese EV company BYD dethroned Tesla to become the world’s top seller of electric vehicles last year. To do that, BYD has relied on its home market of China for more than 80% of its sales.
But BYD is also strong outside China. Since 2021, is started rapidly expanding its global presence with a focus on passenger vehicles. In Africa it has presence in South Africa, Zimbabwe, Rwanda, Kenya and other countries. In most of these countries, it’s the only EV and Hybrid automaker that has local manufacture and assembly presence.
Another company smarting from this strategy is Apple. Its iPhone sales were down 24% in China as Huawei flagships are increasingly popular there. This growth in Huawei phones popularity has resulted in the resurgence of the telecoms company as a big contender even globally.
EVs, like phones and computers, rely heavily on computer chips. In 2023, the US implemented licensing requirements restricting chip exports to China, citing national security and foreign policy objectives. These restrictions apply to dual-use items and some non-sensitive military technology.
However, these measures have become a double-edged sword, causing difficulties for both US and Chinese companies. In response, China is actively working to reduce its reliance on US technology.
On the US side, chipmaker Nvidia acknowledged earlier this year in its filings that its “competitive position has been harmed” as a result of the restrictions.
But the US itself is not stopping the trade war. This past week, the US House voted in favour of a bill threatening TikTok with a ban — unless it is divested from its Chinese parent company, ByteDance, within 6 months.
U.S. officials have suggested that TikTok’s security and privacy policies leave room for its data to be with the Chinese government. The Chinese government hasn’t reacted strongly to the TikTok bill yet. Instead of taking drastic action, they’ve criticized the bill as unfair treatment by the US.
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