(Yicai Global) April 17 -- Shanghai has been encouraging state-owned SAIC Motor, which set up a CNY6 billion (USD873.2 million) chip industry ecology fund on April 15, and other local carmakers to actively invest in the auto chip industry to help address the sector’s chip shortage.

Shanghai has advantages in the integrated circuit and auto industries, Tang Wenkan, deputy director of Shanghai’s economy and informatization commission, said at a forum on April 15. So the city should focus on the interconnection between vehicles and chips to promote the highly integrated development of the two industries, he added.

A new energy vehicle uses about 1,000 to 2,000 chips, two to four times that of fuel-powered cars, said Li Yajun, chairman of IC investment platform Shanghai Sunic Capital. China's auto chip market was worth about CNY100 billion (USD14.6 billion) last year, with the average cost per car reaching almost USD600, Li noted.

Because the market for auto chips is much narrower than that for those used in consumer electronics, related companies face greater risks. In this regard, Ye Tianchun, secretary general of the China Integrated Circuit Innovation Alliance, suggested that upstream and downstream auto chip companies share economic interests and risks.

“We encourage financial firms, especially insurers, to develop products that specifically target the auto chip industry,” Tang noted.

With only a single-digit car chip localization rate, China is highly dependent on European and US manufacturers for supplies.

China should strive to develop system solutions based on domestic chips rather than simply replacing imported products with domestic ones, Ye said regarding the future development of the country’s auto chip industry. Carmakers should re-design their vehicle system architecture and set up technical support and standard systems based on domestic parts and components, Ye added.

Editors: Liao Shumin, Futura Costaglione