China's Auto Industry Shifts Away from Nvidia Chips

Chinese automakers are accelerating efforts to replace Nvidia chips, driven by concerns over supply chain disruptions and high costs. Chinese chipmakers such as Tsinghua Unigroup and Shanghai IC Industry Investment Fund are ramping up production of alternative chips, while Chinese automakers are also investing in domestic chip production. The push is seen as a strategic move to reduce dependence on foreign chip suppliers and ensure a stable supply of automotive chips.

Chinese automakers, including Xpeng and Nio, are rapidly accelerating efforts to replace Nvidia chips with domestic alternatives, driven by concerns over potential supply chain disruptions and high costs. This strategic shift aims to reduce dependence on foreign chip suppliers and ensure a stable supply of automotive chips.

Xpeng and Nio have already integrated their in-house chips into their latest models. Xpeng used its Turing chip, while Nio deployed its Shenji NX9031 chip. Other major players, such as SAIC Motor, BYD, Geely, and Great Wall Motor, are also actively developing models powered by homegrown semiconductors. China aims to eliminate all foreign auto chip use by 2027, with top brands planning mass production using 100% domestic chips by 2026 [1].

The push is being overseen by China’s Ministry of Industry and Information Technology, which requires automakers to conduct regular self-assessments of domestic chip usage. This shift follows Nvidia’s announcement that it will exclude China from future revenue forecasts after losing $2.5 billion in the first quarter due to US export controls [2]. Nvidia’s withdrawal of its Hopper chips from China due to US export bans has forced the company to write off $5.5 billion in inventory and forgo around $15 billion in potential sales [2].

Despite Nvidia’s denial of re-entering the Chinese market with a new AI chip, Shenzhen-based supplier ZJK Industrial is ramping production for the B40, a custom AI accelerator based on Nvidia’s Blackwell architecture tailored for China. ZJK expects to begin mass production in June and ship over 1 million units by the end of 2025 [2].

The market reaction to these developments has been mixed. Xpeng (XPEV) is trading higher by 1.66% to $19.61 premarket at last check Wednesday, while Nio (NIO) is up 3.33% [2].

References:
[1] https://asia.nikkei.com/business/technology/tech-asia/china-s-automakers-speed-up-efforts-to-replace-nvidia-chips
[2] https://www.benzinga.com/markets/tech/25/08/46896066/nio-xpeng-lead-chinas-push-to-ditch-nvidia-chips