Volkswagen just announced an investment of more than 200 million dollars to develop its own advanced chips in China. According to the firm, it will have a processing power of between 500 and 700 TOPS (operations per second), and will be specifically designed to power semi-autonomous driving systems in vehicles that the brand manufactures for the Chinese market.
Technological claudication. What Volkswagen presents as part of its strategy “In China, for China” It is, in fact, an implicit recognition of its inability to compete on its own in the field of artificial intelligence and automotive software. The German manufacturer has lost ground dramatically in the largest car market in the world: its sales fell from more than 4 million units in 2018 to 2.75 million in 2024, and in 2023 it lost its throne as the best-selling brand in China at the hands of BYD.
Chinese technology as life jacket. The development of the chip will be carried out via Carizona joint venture between Cariad (Volkswagen’s software division) and Horizon Robotics, a Chinese firm specializing in integrated circuits with artificial intelligence.
According to declared Frank Han, CEO of Cariad China, the chip will be manufactured with 3-4 nanometer technology and will have a power comparable to Nvidia’s Thor processor, which reaches 700 TOPS. By 2030, 80% of Volkswagen Group vehicles sold in China will be developed with the Chinese electronic architecture (CEA). Delivery of the chip is planned within three to five years.
Production separation. Volkswagen is, de facto, dividing its production. In China, customers They demand cars full of technologywith advanced assisted driving systems and permanent connectivity. Local manufacturers such as BYD and Xiaomi have taken the lead in this regard, forcing the Western giants to adapt their strategy or die trying.
Besides, chinese regulations They expressly prohibit driving data collected in the country from leaving its borders, making it inevitable that the manufacturer will choose to produce its vehicles in a radically different way than it does in the West.
TOhook up with someone who can do what you don’t know. Volkswagen adapting its production to China goes beyond semiconductors. According to mention CNBC, the German brand will be the first customer to use Xpeng’s new semi-autonomous driving system, which the Chinese company presented as superior to Tesla’s Full Self-Driving. Volkswagen has also expanded its collaboration with Xpeng to jointly develop electronic architectures for more models in China.
Survival in a fierce market. Volkswagen, like the rest of the manufacturers, is at a point where geopolitical tensions between China and the United States are disrupting semiconductor supply chains. According to account Bloomberg, manufacturers such as Volkswagen, BMW and Honda have recently faced a supply crisis after Beijing will block Nexperia exports in retaliation for the control that the Dutch Government exercised over the Chinese-owned company.
Developing your own chips in China is, in part, a strategy to reduce dependence on external suppliers, something essential to survive in a context of growing global technological fragmentation.
Two companies in one. Volkswagen now faces the challenge of managing two parallel technological ecosystems: one for China and another for the rest of the world. This also comes with a cost, with more investment, separate teams and the risk of losing synergies. But the alternative is worse.
As declared Ralf Brandstätter, president and CEO of VW China, “we are accelerating and deepening the implementation of our ‘In China, for China’ strategy, going beyond localized production to master the core technologies that will shape the mobility of tomorrow.” Volkswagen has understood that it can no longer export its technological model to China, but rather import Chinese technology to survive there.
Cover image | Volkswagen
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