China’s semiconductor sector has emerged as a cornerstone of its technological ambition, propelled by significant government investment and a strategic push for self-sufficiency. In 2024, the industry was valued at £134.2 billion, with projections indicating a compound annual growth rate (CAGR) of 7.8% from 2025 to 2034, potentially reaching £283.7 billion by 2034. This growth reflects China’s determination to reduce reliance on foreign chips, which accounted for 83% of its £185.5 billion chip consumption in 2020, and to establish itself as a global leader in semiconductor innovation. The sector’s rapid development, driven by advancements in artificial intelligence (AI), 5G, and electric vehicles (EVs), positions China at the forefront of the global tech race, though geopolitical tensions and technological gaps present significant challenges.

China’s semiconductor industry began in earnest during the 1980s, with early efforts like Project 908 and Project 909 aimed at building domestic capabilities. These initiatives, including partnerships with foreign firms like NEC, faced setbacks due to outdated technologies and global market downturns. A pivotal shift occurred in 2014 with the National Integrated Circuit (IC) Industry Investment Fund, or “Big Fund,” which injected £17.6 billion initially, followed by £23.3 billion in 2019 and £36.8 billion in 2023. The “Made in China 2025” strategy set ambitious targets of 40% self-sufficiency by 2020 and 70% by 2025, though the actual figure reached only 30% by 2025, underscoring the complexity of achieving technological autonomy. Despite this, China’s 53.7% share of global chip consumption in 2020 highlights its position as the world’s largest semiconductor market.

Key players dominate China’s semiconductor landscape. Semiconductor Manufacturing International Corporation (SMIC), the country’s largest foundry, reported £9.77 billion in revenue in Q1 2024, a 19.7% year-on-year increase, making it the world’s second-largest pure-play foundry behind Taiwan’s TSMC. SMIC’s production of 7-nanometer chips, such as the Kirin 9000S for Huawei’s Mate 60 Pro, demonstrates its ability to innovate despite U.S. export controls. “SMIC is at most only a few years behind Intel and Samsung,” noted industry analyst Dylan Patel, highlighting its progress in advanced node manufacturing. Hua Hong Semiconductor, the second-largest Chinese chipmaker, holds a 2.6% global market share, focusing on mature node chips. HiSilicon, a Huawei subsidiary, designs advanced chips like the Kirin series, while Yangtze Memory Technologies Corporation (YMTC) has achieved a 5% global market share in NAND flash memory, with plans to surpass 10% by 2027. Other notable firms include Hygon Information Technology, producing x86-based CPUs, and Loongson Technology, developing MIPS-compatible microprocessors for domestic applications.

Opportunities for partnerships are abundant, particularly in mature node manufacturing and emerging technologies. China’s dominance in EVs, with 35 million vehicles projected for 2025, drives demand for power management and sensor chips, creating openings for collaboration with foreign firms. For instance, joint ventures like Vanguard International Semiconductor’s partnership with NXP to form VisionPower Semiconductor Manufacturing Company in Singapore highlight the potential for cross-border cooperation. The rise of 5G, with China projected to have 430 million users by 2025, further fuels demand for advanced chips, offering opportunities for firms specialising in AI and IoT applications. China’s focus on RISC-V architecture, supported by companies like Alibaba’s T-Head, presents a pathway for partnerships in open-source chip design, reducing reliance on Western intellectual property like Arm.

However, the sector faces significant risks. U.S.-led export controls, tightened in October 2023, restrict access to advanced lithography equipment, particularly extreme ultraviolet (EUV) machines critical for sub-5nm chips. ASML, a Dutch firm with a monopoly on EUV technology, remains a chokepoint, as noted by the Federal Reserve: “A single Dutch company, ASML, has 100% market share for the most advanced lithography machines.” China’s Shanghai Micro Electronics Equipment (SMEE) has developed a 28nm lithography machine, but closing the gap to 5nm or below remains a challenge. Geopolitical tensions, including U.S. tariffs and sanctions on firms like Huawei, exacerbate supply chain vulnerabilities. “U.S. trade restrictions on China can hamper its global position as a manufacturing hub,” warned Fortune Business Insights. Overcapacity in legacy chips, driven by aggressive subsidies, risks price wars that could destabilise global markets. Additionally, a talent shortage and high capital costs (SMIC’s 2023 budget rose 18% to £5.82 billion) pose internal challenges.

Growth projections remain optimistic despite these hurdles. The global semiconductor market is expected to grow at a 15% CAGR from 2025 to 2030, reaching £777.7 billion by 2030, with China’s share projected to increase significantly. The memory segment, led by firms like YMTC, is anticipated to surge by 24% in 2025, driven by high-bandwidth memory (HBM) for AI applications. China’s focus on mature nodes (28nm and above), which account for 40% of the global market by 2030, aligns with its strengths in automotive and industrial applications. “Chinese foundry players are performing well in 2024, with a high utilisation rate of around 87% expected in 2025, thanks to the ‘Design by China + Manufacturing in China’ policy,” stated a Wikipedia analysis. Investments in 110 new fab projects since 2014, totalling £151.9 billion, underscore China’s commitment to expanding capacity, with 40 fabs operational and 38 under construction.

The integration of AI and 5G technologies is a key driver of growth. China’s leadership in 5G, with over one million base stations and 80% year-on-year growth in 5G smartphone shipments in 2021, creates a robust domestic market for semiconductors. The automotive sector, particularly EVs and autonomous driving, demands sophisticated chips for battery management and sensors, further boosting demand. “The semiconductor supply chain, spanning design, manufacturing, testing, and advanced packaging, will create a new wave of growth opportunities,” said Galen Zeng, Senior Research Manager at IDC Asia/Pacific. However, the industry’s reliance on government subsidies, estimated at £116.3 billion over the past decade, raises concerns about sustainability and market distortions, as noted by the Semiconductor Industry Association.

China’s semiconductor sector stands at a crossroads, balancing remarkable progress with formidable challenges. Breakthroughs like SMIC’s 7nm chips and YMTC’s 200+ layer NAND flash demonstrate innovation, yet the lack of EUV technology and geopolitical headwinds limit cutting-edge advancements. “It is entirely possible that five or ten years from now there is a far more developed indigenous ecosystem for Chinese chip equipment suppliers,” suggested Feldgoise in a CKGSB Knowledge article, pointing to long-term potential. As China continues to invest heavily and foster partnerships, its semiconductor industry is poised to reshape global supply chains, offering both opportunities and risks for international stakeholders.

The post China’s Semiconductor Sector appeared first on Focus - China Britain Business Council.

In Guangzhou in 2014, a company emerged with a vision to redefine the driving experience. XPeng Motors, or Xiaopeng to its Chinese audience, set out not just to craft electric vehicles, but to embed artificial intelligence at their core, creating cars that anticipate and adapt to their drivers. Founded by He Xiaopeng, a former Alibaba executive with a passion for digital innovation, XPeng has grown from a determined startup into a global force, challenging industry titans and capturing imaginations – including, now, in the United Kingdom.

The story begins with He Xiaopeng, a tech trailblazer who saw cars as the next frontier for software. Having built UCWeb, a mobile browser acquired by Alibaba in 2014, he pivoted to automotive, inspired by the global surge in sustainable transport. He was joined by Henry Xia and He Tao, both veterans of China’s car industry. Xia brought years of expertise from Guangzhou Automobile Group, a cornerstone of Chinese manufacturing, while Tao’s research and development skills ensured XPeng’s vehicles could meet exacting standards. They rooted their headquarters in Guangzhou, a hub of industry, and established a second base in Mountain View, California, strategically nestled in Silicon Valley, near the likes of Tesla.

Those early days were fraught with challenges. China’s electric vehicle market was already fiercely competitive, with domestic giants including BYD, a Shenzhen-based leader in affordable EVs and battery technology, and NIO, a Shanghai-headquartered maker of premium electric cars known for its luxurious designs and innovative services, dominating headlines. Globally, Tesla’s sleek models set a high bar. XPeng grappled with supply chain constraints and the need to build a reputation from scratch. Yet its founders focused relentlessly on research, particularly in autonomous driving and AI, believing that intelligence would distinguish them. By 2018, they unveiled the G3, a compact electric SUV blending affordability with smart features, announcing XPeng’s arrival with confidence.

He Xiaopeng remains the heartbeat of XPeng’s mission. His tech roots shape the company’s emphasis on user-focused innovation, from seamless voice controls to intuitive interfaces. “We’re building intelligent mobility for all,” he told Reuters in 2024, his conviction clear. His leadership is bolstered by a formidable team. Henry Xia’s manufacturing know-how ensures reliability, while He Tao drives technical breakthroughs. Brian Gu, vice chairman and president, brings financial sharpness from his J.P. Morgan days, guiding XPeng’s global strategy. The team includes former executives from Ford, BMW and Tesla, lending a worldly perspective vital for markets like the UK.

Funding has powered XPeng’s ascent, blending Chinese and international capital. In 2018, Alibaba and Foxconn, the Taiwanese electronics manufacturing giant, led a £260 million round, captivated by XPeng’s tech-forward vision. Alibaba’s support extended beyond cash, integrating XPeng into its digital ecosystem for sharper software. By 2020, global investors such as Qatar’s sovereign wealth fund and US and Asian funds added £230 million, followed by £380 million more. XPeng’s 2020 New York Stock Exchange listing raised £1.1 billion, affirming its global appeal. About 60% of its funds come from Chinese investors, including IDG Capital and Xiaomi, with 40% from international sources, enabling XPeng to navigate both Eastern and Western markets adeptly.

XPeng’s defining trait is its pursuit of intelligence. Unlike BYD, which excels in volume and battery prowess, or NIO, with its focus on luxury and customer-centric services such as battery-swapping, XPeng crafts vehicles that feel alive with technology. Its cars boast advanced driver-assistance systems (ADAS), voice-activated controls and software updates that evolve over time. “No Chinese carmaker matches our AI scale,” He Xiaopeng proclaimed in a 2024 social media post, spotlighting his company’s in-house work on autonomous driving, leveraging techniques like reinforcement learning.

The current lineup showcases this approach. The P7+ sedan, priced from £27,000 to £35,000, delivers a 400-mile range and ADAS that competes with pricier rivals, appealing to professionals seeking sophistication. The G6 SUV, going for £23,000 to £31,000, draws younger drivers with its sleek design and smart cockpit, featuring real-time navigation and voice interaction. Launched in 2024, the MONA M03, a £15,000 compact EV, targets urban commuters, its affordability and tech driving thousands of monthly sales in China. The X9, a £38,000 MPV, caters to families with luxury and space, recently exported to markets including Thailand. XPeng is also pushing boundaries with its AeroHT division, developing eVTOL (electric vertical take-off and landing) flying cars. While still in prototype – showcased at events like the 2024 Beijing Auto Show – these hint at a future where XPeng’s ambitions soar beyond roads. By late 2025, XPeng aims to roll out Level 3 autonomous driving across its range, a step toward hands-free travel.

XPeng’s pricing is strategic, undercutting Tesla’s Model 3 (£27,000-plus) and BYD’s Han EV (£23,000-plus). Its premium models rival NIO’s ES6 (£35,000) and Li Auto’s L9 (£38,000), a Chinese brand known for hybrid SUVs. In China, XPeng faces intense rivalry – BYD’s scale and battery expertise dominate the mass market, while NIO’s high-end focus and lifestyle offerings like battery-swapping stations carve a unique space. XPeng’s AI emphasis, however, resonates with tech-hungry buyers, giving it an edge both at home and abroad.

Globally, XPeng is on the move. Since 2020, it has entered Europe, starting with Norway, a leader in EV adoption, then Sweden, Germany and France, navigating EU tariffs of up to 35.3%. “We’ll be in 60 countries by late 2024,” He Xiaopeng vowed in a press release, undeterred by trade challenges. In February 2025, XPeng shipped 300 right-hand drive X9s to Thailand, capitalising on Southeast Asia’s EV growth. Co-president Gu Hongdi told Bloomberg, “ASEAN’s low EV penetration and fast adoption are ideal for us.” XPeng aims for 50% of sales to come from overseas by 2033, backed by local charging infrastructure and tailored software.

The UK marks a pivotal chapter. In 2025, XPeng launched here with the G6 SUV and the X2, a concept car with gullwing doors that Wallpaper magazine called “a bold vision of tomorrow”. Showrooms in London and Manchester have drawn curious crowds, with the G6’s £23,000 starting price and 350-mile range appealing to families and commuters alike. The X2, while not yet in production, has sparked buzz for its futuristic design, hinting at XPeng’s flair for innovation. In a market where EVs like the Nissan Leaf (£26,000) and MG4 EV (£21,000), from Chinese-owned MG, compete fiercely, XPeng’s AI-driven features – such as predictive navigation and voice controls – could win over tech-savvy Britons. However, tariffs and brand unfamiliarity pose hurdles. “The UK loves innovation, but trust takes time,” an XPeng spokesperson told Autocar in March 2025. With plans to expand dealerships and partner with UK charging networks, XPeng is betting on its intelligent design to carve a niche.

Looking forward, XPeng’s plans are bold. In his 2024 letter shared widely online titled “2025 New Journey, Through the Storm, Keep Running!” He Xiaopeng set a goal of one million annual sales, up from 30,000 monthly in 2024, and Level 3 autonomy in all models by 2025. He’s investing in talent via the “Thousand Generals Plan” to train leaders and the “Explorer Plan” to inspire engineers. Globally, XPeng targets Asia, Europe, and potentially North America, despite trade barriers. AeroHT’s eVTOL work, while speculative, keeps XPeng forward-looking, with He Xiaopeng teasing “sky-bound mobility” at a 2024 tech summit.

From Guangzhou’s streets to Britain’s motorways, XPeng’s journey reflects China’s rise as an innovation hub. He Xiaopeng’s vision, backed by a stellar team and robust funding, has made XPeng a challenger to BYD, NIO, and Tesla. As it accelerates into a competitive future – on roads and, perhaps, in the air – XPeng’s blend of intelligence and accessibility signals a brand not just keeping up but leading the charge.

The post XPeng Motors: China’s answer to electric innovation lands in the UK appeared first on Focus - China Britain Business Council.

Chinese EV manufacturer BYD posted record sales of electric vehicles (EVs) in 2024, as Elon Musk’s Tesla saw sales slow for the first time in years. BYD reported that it sold 4.3 million EVs and hybrids in 2024, of which 1.76 million were pure EVs. While Tesla narrowly beat BYD across the whole of 2024, delivering 1.79 million pure EVs, BYD’s 2024 Q4 did actually surpass Tesla.

BYD (short for ‘Build Your Dreams’) was founded in 1995 as a rechargeable battery manufacturer. It expanded into automotive after buying a Shaanxi-based car company in 2003, using its battery experience and supply chains to pivot to EV. It is popular for its cheaper models, which range in price from around RMB 70,000 (£7,697) to RMB 200,000 (£21,991). Tesla’s Model 3, on the other hand, starts at RMB 231,900 (£25,499).

Tesla remains the world’s most valuable car maker, driven by its innovative approach, high-performance vehicles and strong branding (thanks, in part, to the inescapable figure of Elon Musk). However, its higher price point has made it less accessible to a broader market segment, an area where BYD has gained a competitive edge.

This edge over other Chinese brands and, increasingly, international brands, has been sharpened by a number of external and internal factors.

Like all Chinese EV companies, BYD has benefitted from extensive Chinese government subsidies over the past few decades. The government has been subsidising producers of EVs for public transport, taxis and the consumer market since 2009. More than RMB 200 billion (£22.14 billion) was spent on EV subsidies and tax breaks in China over the 2009-2022 period. Moreover, EV consumers in China have received purchase subsidies from the government for a number of years. China is expected to sell more EVs (pure EVs and hybrids) than traditional vehicles for the first time in 2025.

China also has a very strong position in the supply chains for the critical materials used to make EV batteries, especially rare earths. At present, China accounts for over 80% of the world’s rare earth processing, and in late 2024, the country banned shipments to the US of several minerals and metals used in semiconductor manufacturing and military applications, including gallium, germanium and antimony, citing national security concerns.

In terms of internal factors, BYD has also benefitted from its background as a battery manufacturer, which has given it a head start in terms of technology and access to materials. By keeping battery production in-house, it can also achieve significant cost savings.

The big threat posed by BYD’s recent success is increased competition for established automotive brands.

Western markets have largely taken a protectionist stance in response to the massive growth of China’s EV sector. In October 2024, tariffs of up to 45.3% on imports of Chinese-made EVs came into force across the EU, while the Biden administration has also imposed a 100% duty on EVs from China, with President-elect Donald Trump expected to impose further tariffs on imports.

Nevertheless, some commentators suggest that BYD and Tesla are so far ahead of the field that traditional automotive manufacturers are already struggling to compete. Indeed, the growth of the two companies is showing that brand recognition or company history are not predictors of success in the EV market. Future growth will come down to things like AI integration and battery technology, rather than just the cars themselves, giving Silicon Valley and fast-moving Chinese companies a leg-up over traditional car manufacturers.

Now the question for BYD will be whether it can translate its current sales figures, most of which are concentrated in the Chinese market, into global success. For Tesla and other EV manufacturers, the rise of BYD serves as a call to innovate in an increasingly competitive market, innovation that could have a positive knock-on effect in other areas. Ultimately, getting more EVs of any brand on the road is an important step towards giving more people more access to sustainable transportation options.

The post How Chinese EV manufacturer BYD overtook Tesla appeared first on Focus - China Britain Business Council.

2024 started with a surprise for the automotive industry as Chinese manufacturer BYD announced that it sold more battery electric vehicles (BEVs) (526,409) than Elon Musk’s Tesla (484, 507) in Q4 of 2023. This is the first time that sales by a Chinese company have outpaced the US titan.

BYD (short for ‘Build Your Dreams’) was founded in 1995 with an initial focus on rechargeable batteries. It expanded into automotive after buying a Shaanxi-based car company in 2003, using its battery experience and supply chains to pivot to electric vehicles. It sold over 3 million EVs in 2023 (including both hybrid and battery-only models), an increase of 62% over 2022. Its popular models include the best-selling Qin Plus, a compact car that retails for between RMB 99,800 and 176,800 (£11,065-19,602), the Dolphin hatchback, which retails for between RMB 116,800 and 139,800 (£12,949-15,497), and the premium Yangwang SUV.

Technically, Tesla still sold more BEVs across the whole of 2023 (1.81 million vs. BYD’s 1.57 million), and it remains the world’s most valuable car maker, but as Sino Auto Insights noted, “symbolically an important line has been crossed”. Tesla’s innovative approach, high-performance vehicles and strong branding (driven, in part, by the inescapable figure of Elon Musk) have contributed to its dominant position, but its higher price point has made it less accessible to a broader market segment, an area where BYD has gained a competitive edge.

This edge over other Chinese brands and, increasingly, international brands, has been sharpened by a number of external and internal factors.

Like all Chinese EV companies, BYD has benefitted from extensive Chinese government subsidies over the past few decades. The government has been subsidising producers of EVs for public transport, taxis and the consumer market since 2009. More than RMB 200 billion (£22.14 billion) was spent on EV subsidies and tax breaks in China over the 2009-2022 period. Moreover, EV consumers in China have received purchase subsidies from the government for a number of years.

China also has a very strong position in the supply chains for the critical materials used to make EV batteries, especially rare earths. At present, China accounts for 85% of the world’s rare earth processing and 92% of rare earth magnet production.

In terms of internal factors, BYD has also obviously benefitted from its background as a battery manufacturer, which has given it a head start in terms of technology and access to materials. By keeping battery production in-house, it can also achieve significant cost savings.

The big threat posed by BYD’s recent success is increased competition for established automotive brands.

Western markets have largely taken a protectionist stance in response to the massive growth of China’s EV sector. In September 2023, the European Commission launched an investigation into whether to impose higher tariffs on Chinese BEVs (the standard EU tariff on imported vehicles is 10%). The US currently imposes 25% tariffs on Chinese automobiles, and the Biden administration is reportedly considering upping this levy. Chinese automakers could get around this by setting up factories in Europe or in Southeast Asian countries.

Nevertheless, some commentators suggest that BYD and Tesla are so far ahead of the field that other companies are already struggling to compete. Indeed, their growth is showing that brand recognition or company history are not predictors of success in the EV market. Future growth will come down to things like AI integration and battery technology, rather than just the cars themselves, giving Silicon Valley and fast-moving Chinese companies a leg-up over traditional car manufacturers.

Now the question for BYD will be whether it can translate its current sales figures, most of which are concentrated in the Chinese market, into global success. For Tesla and other EV manufacturers, the rise of BYD serves as a call to innovate in an increasingly competitive market, innovation that could have a positive knock-on effect in other areas. Ultimately, getting more EVs of any brand on the road is an important step towards giving more people more access to sustainable transportation options.

The post How a Chinese EV brand overtook Tesla appeared first on Focus - China Britain Business Council.