NXP Semiconductors and Datang Telecom Technology Co. Ltd., in a joint venture (JV), formed Datang NXP Semiconductors Co. Ltd., a fabless firm considered to be the first automotive semiconductor company in China.
Datang NXP is focused on automotive ASICs (application specific integrated circuits) based on mixed signal technology, which Drue Freeman, NXP senior vice president, global automotive sales & marketing, notes is one of NXP’s key strengths and core differentiators.
“The applications we’re targeting, around electric vehicles, are applications that call for converting voltages or currents or monitoring battery health, and those are especially well-suited to analog mixed-signal technology. It’s just a good fit.”
Freeman notes that China is a market in which most businesses are joint ventures. “The government tends to prefer it that way,” he says. “We wanted to be part of a truly Chinese company within which we would have significant influence, and this (JV with Datang) was the outcome.”
The joint venture is an interesting move, according to Chris Webber, vice president of the automotive practice at Strategy Analytics. “Given the appalling air quality in China’s cities, zero-emission electrified powertrains are a good long term bet, though car volumes will remain relatively low for at least the mid-term relative to overall sales and are reliant to a degree on the strength of government policy,” Webber says.
As the world’s largest manufacturing center, China has experienced rapidly increasing air pollution from greenhouse gas emissions. It also suffers from a scarcity of oil reserves. NXP estimates that crude oil imports account for 54% of China’s total oil usage and cars account for 40% of national oil consumption. The Chinese government has good reason to want more hybrid and electric vehicles on its roads.
“In the West, outside of China, there is still a lot to be gained in efficiencies going after conventional technology,” says Freeman. “The momentum around electric and hybrid electric vehicles has cooled down in the last couple of years.
“The need for electrification in China is still really great,” Freeman continues. “The car penetration rate is low and pollution is getting pretty bad so if they are going to reach the same level of cars per-capita as Japan, or the U.S., there is going to be a real strain on the environment if there isn’t a transition toward electrification, and the government there is really promoting innovation toward the electrification of the drivetrain.
“They also see it as an opportunity to compete against the developed economies. That’s what’s driving this push in China. It’s the largest and fastest growing automotive market in the world, and if the electrification market is going to take off there’s a pretty good chance it’s going to happen in China, and it’s going to happen with a strong preference toward domestic suppliers. Rather than fighting this trend, why not become a part of it and ultimately leverage that technology outside of China.”
This sounds something worth watching.