Alliance Consultancy: Strategy and Cost Consideration Drive Positive Attitude Shift in Cooperation between European and Japanese IDM Companies and Chinese Wafer Factories.

TrendForce Alliance Consulting states in an article that China is shaping its supply chain with a focus on the "China for China" strategy, especially evident in the automotive industry. As China encourages domestic auto companies to increase the proportion of domestically produced chips to 25% by 2025 and also supports foreign companies in local production, the "China for China" strategy and cost considerations have driven a more positive attitude towards cooperation between European and Japanese IDM companies and Chinese wafer fabs. Major automotive chip suppliers such as STMicroelectronics NV ADR RegS (STM.US), Infineon, NXP Semiconductors NV (NXPI.US), and Renesas have been actively negotiating partnerships with Chinese wafer fabs such as Semiconductor Manufacturing International Corporation (688981.SH) and HHGrace, which will help accelerate the development of diversified platforms by Chinese wafer fabs. In the past, Chinese wafer fabs had difficulty securing outsourcing orders for automotive MCUs from IDMs due to slower development in eFlash/eNVM processes and the need for automotive products to undergo lengthy regulatory and factory validation processes. In recent years, Chinese auto manufacturers have not only needed to consider international trends and meet localization production requirements, but also have been introducing entry-level vehicle models, prompting automotive suppliers to actively seek cost reduction options. TrendForce Alliance Consulting indicates that in the field of industrial control/automotive MCUs, STMicroelectronics NV ADR RegS has been the first to cooperate with HHGrace on the development of 40nm industrial control/automotive MCU products. If the process development goes smoothly, mass production is expected by the end of 2025. Renesas, Infineon, and others have also begun actively negotiating foundry collaboration with Chinese wafer fabs starting in 2024, with NXP Semiconductors NV recently mentioning plans to establish a supply chain in China, although there is no plans for a factory, but also actively negotiating foundry matters with Chinese wafer fabs. For foreign wafer fabs with facilities in China, they may be able to assist customers in transferring products across processes or platforms to meet localization production requirements. However, their foundry prices still need to compete with Chinese domestic wafer fabs, and the pressure and challenge level remains high. TrendForce Alliance Consulting points out that although IDM and Chinese wafer fabs are actively establishing cooperation on automotive and industrial control-related chips, they still need to undergo more rigorous standard verification and factory validation than consumer applications before entering mass production. Therefore, TrendForce Alliance Consulting estimates that products manufactured by IDM in response to "China for China" may enter mass production as early as the second half of 2025 and contribute to revenue, with their influence expected to continue expanding until 2026.