China Dominates New Electrification Chains, While Advanced In-vehicle SoCs Remain a Key Weakness

Overview

The report focuses on supply chain resilience and localization rates, systematically reviewing China’s competitive position in power batteries, electric drives, power semiconductors, intelligent driving, smart cockpits and traditional auto parts. The conclusion shows that China already dominates most high-growth electrification segments and has formed cost and technology advantages through large domestic demand, policy support, intense competition and OEM vertical integration; however, advanced in-vehicle SoCs and some mature traditional components remain areas with high external dependence.

Core views

China’s auto supply chain leadership is concentrated in emerging areas where technology paradigms are changing rapidly and existing barriers are relatively weak. Power batteries, electric drives, 4D millimeter-wave radar, LiDAR and some ADAS software and domain controllers have achieved high localization and are beginning to be adopted by global automakers in China. By contrast, advanced ADAS SoCs are constrained by high computing power requirements, functional safety, software ecosystems and the stickiness of the CUDA ecosystem, while cockpit SoCs also remain dominated by Qualcomm. The traditional tire, seat, passive safety, braking and steering industries are highly mature, and overseas suppliers maintain strong defensibility through long-term customer relationships, localized capacity, engineering accumulation and brand reputation.

Analysis framework

The report compares Chinese suppliers’ market shares, localization rates and historical changes by auto value-chain segment, and explains share changes by combining factors such as policy support, domestic market scale, OEM vertical integration, cost competitiveness, pace of technology iteration, customer relationships and software ecosystems, while mapping the investment implications for Chinese OEMs, domestic suppliers and overseas leaders.

Methodology notes

• Industry chain analysisSupply chain localization rate mapping

  Measure the localization level of each auto parts segment by Chinese suppliers’ market share.

  The report horizontally covers upstream resources, battery materials, cells, electric drives, power semiconductors, intelligent driving, smart cockpits and traditional components, and identifies leading segments and supply chain weaknesses based on share changes from 2022 to the first half of 2026.

• Competitive advantage analysisStructural localization driver framework

  Explain the speed of domestic substitution from the perspectives of industry maturity, market size, policy support, competition intensity and vertical integration.

  New technology areas lack deeply entrenched overseas incumbents, and China’s large new energy vehicle market, rapid product iteration and OEM in-house R&D drive the expansion of local suppliers; mature components are substituted more slowly due to validation cycles, customer relationships and brand barriers.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• BYD, Geely, Xiaomi and Chinese new energy vehicle OEMs

  Benefit from the maturity and vertical integration of local battery, electric-drive and intelligent-driving supply chains.

  Strengths

  Large domestic market scale, fast product iteration, strong cost control, and the ability to internalize core components and software capabilities.

  Weaknesses

  Intense industry competition and price pressure may compress profits, while some advanced chips still rely on overseas supply.

  Comparison

  Compared with global traditional automakers, Chinese OEMs move faster in electrification supply chain coordination and the rollout of intelligent functions to lower vehicle segments.

  Risks

  Demand slowdown, price wars, overseas trade restrictions, changes in technology paths and lower-than-expected returns on in-house R&D investment.

• Chinese power battery, electric-drive and power semiconductor suppliers

  Among the segments with the highest localization level and strongest global competitiveness in China’s supply chain.

  Strengths

  Possess advantages in scale, cost, manufacturing efficiency, supply chain completeness and rapid commercialization.

  Weaknesses

  The geographic distribution of some upstream resources such as cobalt, lithium and nickel remains overseas.

  Comparison

  Compared with overseas competitors, Chinese companies have significant share advantages in cells, electric drives and most battery material segments.

  Risks

  Overcapacity, price declines, changes in resource-country policies, geopolitical risks and overseas market access restrictions.

• Chinese ADAS, LiDAR and intelligent-driving suppliers

  Benefit from intelligent vehicle penetration, massive data, OEM cooperation and high-computing-power electronic architectures.

  Strengths

  Fast iteration and strong cost competitiveness in areas such as ADAS software, domain controllers, LiDAR and 4D millimeter-wave radar.

  Weaknesses

  Advanced SoCs, underlying software ecosystems and global customer coverage remain relatively weak.

  Comparison

  Chinese companies lead in emerging perception and software segments, but still lag overseas vendors such as NVIDIA in advanced computing chips.

  Risks

  Pace of technology upgrades, R&D spending, OEM in-house substitution, regulatory changes and commercialization profitability.

• NVIDIA and Qualcomm

  Maintain leadership in China’s ADAS SoC and smart cockpit SoC markets, respectively.

  Strengths

  Have leading performance, mature product portfolios, software ecosystems, customer relationships and scaled mass-production experience.

  Weaknesses

  Face pressure from Chinese local chip companies and OEMs’ in-house platforms continuously increasing their shares.

  Comparison

  Current technology and ecosystem advantages are clear, but the technical threshold for cockpit SoCs is lower than for ADAS SoCs, so long-term domestic substitution may be faster.

  Risks

  Export restrictions, geopolitics, maturation of local ecosystems, customer in-house development and market share decline.

• Global traditional auto parts suppliers

  Still hold strong positions in high-end tires, seats, passive safety, traditional braking and steering.

  Strengths

  Have long-term OEM relationships, reliability records, localized production, engineering experience and brand premiums.

  Weaknesses

  High exposure to mature internal-combustion vehicle components, and may lose first-mover advantages in new technologies such as chassis-by-wire.

  Comparison

  Compared with new Chinese entrants, their mature businesses have deeper moats, but growth is weaker than in electrification and intelligentization segments.

  Risks

  Contraction of the internal-combustion vehicle market, OEM vertical integration, gradual penetration by local suppliers and slow product portfolio transformation.

Key data

• China power battery cell shareAbout 98% in the Chinese market and about 77% globallyGlobal share is based on shipments in the first five months of 2026.
• Global capacity share of key battery materialsFrom over 80% to nearly 100%Covers cathodes, anodes, separators, electrolytes, solvents, precursors, electrolyte salts and solid-state electrolytes.
• Localization rate of core electric-drive segmentsAll exceed 90%Includes electric drives, motors and motor controllers; nine of the top ten suppliers are Chinese companies.
• Chinese power semiconductor supplier shareRose from 52% in 2022 to 76% in 2025After the supply shortage in 2021, Chinese OEMs and local power semiconductor companies accelerated capacity expansion and cooperation.
• Domestic share of ADAS domain controllersRose from 49% in 2023 to 82% in 2025Mainly driven by the expansion of local Tier-1 suppliers and vertical integration by OEMs such as BYD and Leapmotor.
• Domestic share of ADAS softwareRose from 19% in 2023 to 54% in 2025In the L2+ and above submarket, Chinese companies have already taken a dominant position.
• Domestic share of 4D forward millimeter-wave radar100% in 2025During the same period, overseas suppliers accounted for about 88% of the traditional 3D forward millimeter-wave radar market.
• Domestic share of advanced ADAS SoCsAbout 33% in the first half of 2026NVIDIA still accounted for about 48% during the same period, with its performance and CUDA ecosystem forming strong barriers.
• Domestic share of smart cockpit SoCsAbout 15% in the first half of 2026Qualcomm’s market share in 2025 was about 73%.
• China’s share of global new energy vehicle salesOver 60%It increased rapidly after 2020, providing local suppliers with a foundation for scale and rapid iteration.

Impact & implications

The scale effects of China’s electrification and intelligentization supply chain will continue to support local OEMs and component companies in lowering costs, shortening development cycles and expanding overseas competitiveness, while prompting global automakers such as Volkswagen and Toyota to more deeply adopt local batteries, components and software in China. Investment opportunities are more concentrated in batteries, electric drives, power semiconductors, LiDAR, ADAS software and domain controllers that have already formed globally leading shares, as well as domestic cockpit SoCs with medium- to long-term substitution potential. Overseas advanced computing chip leaders still have ecosystem and technology moats in the short term; the main pressure facing overseas traditional component leaders may come more from the contraction of the internal-combustion vehicle market than from immediate domestic share substitution.

Risks

• Continued reliance on overseas suppliers for advanced ADAS and smart cockpit SoCs, where export restrictions or geopolitical conflicts could cause supply chain disruptions.
• Resources such as cobalt, lithium and nickel are mainly distributed overseas, and resource-country policies, ownership arrangements and logistics disruptions may affect supply security.
• Competition and price wars in China’s new energy vehicle industry may weaken the profit margins of OEMs and suppliers.
• Accelerated vertical integration by OEMs may squeeze the market space of independent component suppliers.
• Local chip companies’ software ecosystems, functional safety, product performance and customer validation progress may fall short of expectations.
• Traditional component suppliers may face structural pressure from the contraction of the internal-combustion vehicle market and the transition to software-defined vehicles.
• Overseas trade barriers and market access restrictions may weaken the global expansion of China’s supply chain.

What to watch

• Share and mass-production progress of ADAS chips from Horizon Robotics, Black Sesame Technologies and OEM in-house development.
• Customer adoption and commercialization speed of domestic cockpit SoCs from Huawei, SemiDrive, SiEngine Technology and others.
• Overseas orders and profitability of Chinese ADAS software, domain controller, LiDAR and 4D millimeter-wave radar suppliers.
• Whether the domestic share of power semiconductors can continue to rise from 76% in 2025.
• The extent to which global automakers such as Volkswagen and Toyota expand adoption of Chinese batteries, software and intelligent-driving solutions.
• Battery material capacity utilization, price changes and Chinese companies’ effective control over overseas lithium, nickel and cobalt resources.
• The impact of vertical integration by OEMs such as BYD on the shares of independent suppliers and overseas Tier-1 suppliers.
• Inflection points for domestic substitution in high-end tires, seats, passive safety, braking and steering.