ETW 02: Chips are Down but EV Sales are Fast and Furious
Covering Chinese chatters (discourses, narratives, policies and rhetoric) on external events and actors, military and security issues, and India.
Tech Weekly #1: China’s chip imports witness a drop in 2023
By Amit Kumar
In 2023, China’s imports of integrated circuits (IC) dropped both in volume and by value, reports SCMP. Total imports in 2023 accounted for “479.5 billion IC units worth USD 349.4 billion.” The figure is down 10.8 percent by volume and 15.4 percent in value from 2022. China has found it difficult to import advanced chips, especially Nvidia’s H100 and A100 GPUs after the tightened export controls measures. However, the import of IC still managed to triumph USD 337.5 worth of crude oil imports (fell by 7.7%).
The customs data also show that “China’s imports of diodes and similar semiconductor devices, a proxy of garden-variety commodity chips were also down by 23.8 percent in volume terms last year.”
Citing TrendForce, a Taiwan-based IC research company, the report added that “China currently has 44 semiconductor wafer fabs in operations and a further 22 under construction.” Furthermore, “by the end of 2024, the capacity for mature chip production - defined as 28-nanometre and older technologies - will be expanded at 32 Chinese fabs.”
This would push “China’s global share of mature process capacity to reach 39 percent by 2027, up from 31 percent in 2023.”
Tech Weekly #2: China’s EV success forces Tesla to slash prices by up to 6 percent
By Amit Kumar
EVs - the future of the automobile industry, has already expanded at an exponential rate in China and this has made the Chinese market highly competitive. At present, China at 22% is only behind Norway (80%), Iceland (41%) Sweden (32%) and the Netherlands (24%) in terms of EV adoption - EVs sales as a percentage of total sales. According to Clean Techinca’s China EV Sales report released in Sept 2023, China’s fully electric (BEVs) account for 25% of the total automobile sales while if the Plugins (Hybrid) are also accounted for, this share rises to 37%.
In aggregate terms, however, China accounts for ~60% of global EV sales. Furthermore, deliveries of pure EVs and plug-in hybrids have hit 8.9 million units. At present, over 200 domestic players are tussling for a share in the Chinese EV market.
Amidst this cut-throat competition, Tesla has cut the prices of its Shanghai-made vehicles by upto 6 percent to maintain its leading position in the premium segment of the world’s largest eclectic vehicle market.
The SCMP reports:
The Texas-based company announced on Friday that the price of the entry-level edition of its Model 3 will be reduced from 261,400 yuan (US$36,814) to 245,900 yuan, while the starting price of the Model Y is now 258,900 yuan, down from 266,400 yuan.
The price cuts come after Tesla reported 15.7 percent month-on-month sales growth to 75,805 units in mainland China in December, according to data released by the China Passenger Car Association.
Tesla also lowered the price of the dual-motor version of the Model 3 by 3.9 percent and offered a 2.1 percent discount on the dual-motor Model Y.
The front-runner in China’s premium electric vehicle (EV) segment delivered 603,664 EVs made in its Shanghai Gigafactory to buyers in China last year, up 37.3 percent from 2022. The growth was nearly unchanged from the 37 percent sales rise recorded in 2022 when it delivered about 440,000 vehicles. Li Auto, Tesla’s closest competitor in the premium segment, delivered about 376,000 cars in 2023.
Econ Weekly #1: Foreign Investors continue to pull out from China’s capital markets
By Amit Kumar
In December 2023, China’s Capital market oversaw an outflow of USD 3.2 billion. Of this, while the Chinese equities witnessed an outflow of USD 3.4 billion, the debt market saw a marginal inflow of USD 189 million, according to preliminary data from the Institute of International Finance (IIF).
In November, while Chinese stocks saw inflows of USD 191 million, the overseas investors offloaded a total of USD 431 billion worth of Chinese bonds, reports SCMP citing the IIF data.
On the contrary, other emerging markets are witnessing a trend completely opposite of China. IIF in its report said, “While Chinese stocks and bonds have continued to underperform, other emerging market securities are firming up their recovery. This confirms the bifurcation between China and other emerging markets, suggesting a change in sentiment from investors.”
Comment: With the People’s Bank of China (PBOC) already maintaining a tight monetary policy - owing to local government debt risk and efforts to keep the yuan stable, drying up of foreign investment may negatively impact investment growth in the economy.
Latest from the Indo-Pacific Studies Team:
This week, we have focused on covering the Taiwan elections. Anushka Saxena, a Research Analyst with the IPSP team, elaborated on the significance of the Taiwan Polls, the ‘China Challenge’, and the cross-straits policy stances of different candidates, in an Opinion for The Quint.
As the election results were being released, today, Anushka also shared some of her views during a live broadcast by Radio Free Asia (comments by speakers are in Tibetan and English):
Finally, in a Discussion Document for Takshashila, Bharat Sharma and Kingshuk Saha, both Analysts with the IPSP team, write about “The Quad in the Western Indian Ocean Region.”
Executive Summary
The Western Indian Ocean Region (WIOR) sub-region has emerged as an important strategic space for various actors, most importantly China. The Quad’s maritime security mandate involves a policy focus on the Indian Ocean Region (IOR), working towards deepening maritime cooperation in the Indo-Pacific, building a maritime rules-based order, and combating illicit maritime activities in the region.
As a group looking to find ground in the IOR, the Quad should invest its capital and resources towards the WIOR and subsume this focus under its maritime security domain. This discussion document examines two prominent challenges in the WIOR: Illegal, Unreported, and Unregulated Fishing (IUU) and maritime terrorism. It provides policy recommendations regarding how the Quad may aid efforts towards mitigating these challenges.
The Quad can help aid efforts towards meeting the IUU challenge by strengthening legislative frameworks concerning combatting IUU, bolstering regional maritime surveillance networks, and building institutional connections with IOR organisations. Maritime terrorism, particularly drug smuggling and piracy, can be tackled by focusing on the implementation of key legal instruments and frameworks, and aiding capacities of WIOR countries.