European and Japanese IDMs Strengthen Collaboration with Chinese Foundries to Capture ‘China for China’ Opportunities

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TrendForce’s latest investigations reveal that geopolitical dynamics are accelerating the formation of the “China for China” supply chain, driven by China’s vast domestic market. This trend is particularly evident in the automotive sector.

The Chinese government has set a goal for domestic automakers to increase the use of locally produced chips to 25% by 2025 while also encouraging foreign companies to localize their production. In response, major automotive chip suppliers such as STMicroelectronics, Infineon, NXP, and Renesas have been exploring partnerships with Chinese foundries—including SMIC and HHGrace—aiming to accelerate diverse platform development.

Historically, Chinese foundries have faced challenges securing automotive MCU outsourcing orders from IDMs due to slower progress in eFlash/eNVM manufacturing processes and the lengthy automotive-grade and OEM verification processes required.

However, recent geopolitical pressures, along with the launch of affordable EV models in China, have driven automotive suppliers to prioritize cost-efficient solutions. This cost focus—combined with the “China for China” strategy—has led to a more proactive space for European and Japanese IDMs to collaborate with these foundries.

TrendForce reports that STMicroelectronics has taken the lead by partnering with HHGrace to develop 40nm industrial/automotive-grade MCUs. Mass production is expected by late 2025 if development progresses smoothly. Meanwhile, Renesas and Infineon began discussions with Chinese foundries in 2024 for contract manufacturing partnerships. NXP recently announced plans to establish a supply chain in China. While there are no immediate plans for setting up a local manufacturing plant, discussions with Chinese foundries for contract production are ongoing.

For overseas foundries with operations in China, the ability to assist customers in transitioning products across platforms and manufacturing facilities to meet localization requirements presents both opportunities and significant challenges. Price competition with domestic Chinese foundries remains intense, adding pressure to sustain profitability.

TrendForce emphasizes that while IDMs and Chinese foundries are building partnerships in automotive and industrial control chip sectors, these products must undergo rigorous validation standards and OEM certifications that far exceed those required for consumer applications.

TrendForce forecasts that IDM-manufactured products under the “China for China” strategy are expected to enter mass production in the second half of 2025, contributing to revenue growth. The impact of these collaborations is projected to expand further by 2026, solidifying the role of these partnerships in the evolving semiconductor landscape.