Unique opportunity

One of the promising startups is Horizon Robotics, the first Chinese company to commercialize self-designed processors for autonomous driving. Yu Kai, the company's CEO, said smart electric vehicles are a unique opportunity for China to develop its artificial intelligence chips.

"China is now the world's most vibrant market for smart electric vehicles, and the most competitive arena for global tech companies focused on intelligent driving. We believe China will also become a major source of innovation for the smart EV industry," Yu said.

In October, Volkswagen said it would spend 2.4 billion euros ($2.55 billion), its largest single investment in China, to jointly develop driving-assist functions with Horizon Robotics for its electric vehicles. The investment includes setting up a joint venture.

Wang Changlin, head of the Academy of Macroeconomic Research in Beijing, which is part of the National Development and Reform Commission, the country's top economic planner, said international competition will intensify, as there will be overcapacity in global chips for the next few years.

According to a forecast by World Semiconductor Trade Statistics, the global semiconductor market is forecast to decline by 4.1 percent this year to $557 billion — the first annual contraction since 2019.The decline is attributed to a number of factors, including rising inflation and weak consumer markets that hurt chip sales.

"In the future, China's chip industry is likely to face more restrictions, so we have to make substantive breakthroughs in crucial technologies," Wang Changlin said.

China's semiconductor industry lacks talent, according to industry experts.

Sun Yingtong, chairman of Chinese chip company Nationz Technologies, said, "We don't have enough people — not just those who excel in semiconductor technologies, but also those who have an innovative mind and are willing to spend years on R&D."