As cars become more like computers on wheels, automakers are racing to develop their own semiconductors—critical to everything from electric powertrains to self-driving technology. The COVID-19 pandemic exposed the risks of relying on external chip suppliers, and the industry’s shift toward electric and autonomous vehicles has only heightened the demand for high-performance chips.
To reduce dependency on chipmakers, companies are setting up in-house semiconductor design teams, launching research labs in Silicon Valley, and partnering with manufacturers for contract production. Some are even forming joint ventures, such as collaborations with Taiwan’s Foxconn, to co-develop automotive chips.
Electric vehicle (EV) makers like Tesla and China’s BYD have long pursued in-house chip development, but now traditional automakers—including Toyota, Hyundai Motor Group, Stellantis, and General Motors (GM)—are joining the race.
Automotive semiconductors were once considered a niche market, but their role has grown as cars become more technologically advanced. Unlike high-end processors used in smartphones and data centers, car chips are generally less complex, making in-house development more feasible for automakers.
Yet the supply remains constrained. Chipmakers have historically prioritized consumer electronics, leaving car manufacturers competing for a limited supply. This imbalance became glaringly clear during the pandemic, when global shortages forced many automakers to halt production.
According to South Korea’s Electronics and Telecommunications Research Institute (ETRI), conventional internal combustion engine vehicles use around 200 semiconductors per car, while EVs require 1,000, and autonomous vehicles more than 2,000. Among them, power semiconductors—which directly impact an EV’s driving range—are seen as a key area of focus.
Market research firm Verified Market Research projects the global automotive semiconductor market will grow at a compound annual rate of 5.83%, reaching $82.8 billion by 2031 from $54.8 billion in 2024.
Hyundai Motor Group, which had long outsourced most of its chip needs to German supplier Infineon Technologies, is now taking a more active role in semiconductor development. In 2020, its auto parts unit Hyundai Mobis acquired Hyundai Autron, a company that previously focused on internal combustion engine semiconductors. Since then, Hyundai Autron has shifted its focus to EV chip development, and Hyundai Mobis plans to begin contract manufacturing of key automotive semiconductors this year.
Hyundai has also strengthened ties with Infineon, striking a partnership in 2023 to co-develop power semiconductors for EVs and hybrid vehicles.
Toyota has taken a different route, forming a joint venture with its parts affiliate Denso to develop automotive semiconductors. Volkswagen, meanwhile, is investing in chip technology through its software unit Cariad, which aims to create custom semiconductors tailored to its vehicles.
GM is also stepping up its chip strategy. The company has teamed up with Dutch chipmaker NXP Semiconductors to co-develop semiconductors for its next-generation EVs.
Tesla has been developing its own chips from the early days, outsourcing their production to contract manufacturers. Meanwhile, China’s BYD not only develops but also produces its own automotive semiconductors. In 2023, BYD announced plans to invest 100 billion yuan ($13.8 billion) in semiconductor and autonomous driving technology, further accelerating its push into the chip sector.
Beyond developing new chips, automakers are also working to simplify semiconductor supply chains. Many are consolidating multiple functions into fewer chips to reduce complexity and streamline procurement.
Stellantis, for instance, is working with Foxconn to co-develop semiconductors that could replace 80% of the chips currently used in Stellantis vehicles. This effort aims to cut costs, simplify production, and ensure a more stable supply.
“The pandemic exposed vulnerabilities in the automotive chip supply chain,” said Lee Hang-gu, a researcher at the Korea Automotive Technology Institute. “At the same time, China’s push to develop self-sufficient semiconductor technology is further accelerating efforts among global automakers to advance their own chip capabilities.”
