Just How Dependent Is the Automotive Industry on Electronic Components Manufactured in China?

Over the past two decades, the global automotive supply chain has grown increasingly reliant on Chinese manufacturing. Data from the U.S. International Trade Commission has found that in the period between 2007 and 2018, the percentage of U.S. auto parts that were imported from China nearly doubled, jumping from 7% to 13%. Recent media coverage and NGO reporting, meanwhile, speak to even broader Chinese expansion within the global automotive sector. The Council on Foreign Relations, for example, recently pointed out that China now has the manufacturing capacity to supply half of the total global market for automobiles—a staggering achievement that doesn’t even take into account the critical role Chinese factories play in supply chains for U.S. and European carmakers. 

China now has the manufacturing capacity to supply half of the total global market for automobiles—a staggering achievement that doesn’t even take into account the critical role Chinese factories play in supply chains for U.S. and European carmakers. 

But while statistics like these are useful for examining supply chain trends and identifying how sourcing strategies are evolving, hard data can be a very effective tool for analyzing those trends with even greater specificity. 

In this article, we’ve drawn a subset of data from Z2Data’s internal database—which encompasses over one billion components—to more carefully assess the extent to which the automotive industry depends on Chinese manufacturing. In contextualizing and analyzing this data, we hope to take a granular look at what parts of automotive supply chains run through China, as well as the specific components that could be most vulnerable to tariffs, export controls, and other manifestations of a larger trade conflict. 

The Potential Impacts of Overreliance on Chinese Manufacturing 

Before delving into the data itself,  it’s worth taking a moment to explain why examining the auto industry’s dependence on Chinese manufacturing is a worthwhile pursuit at all—and how it could inform future supply chain decision-making by automotive companies. 

Vulnerability to Tariffs and Other Trade Controls 

Although the U.S. has been engaged in a trade conflict with China for five years now, the stakes have ratcheted significantly higher over the past few months. Since the Trump administration came into power earlier this year, the U.S. government has implemented a flurry of tariffs totalling 145% on Chinese imports (there are sector-specific exemptions for some of these tariffs). Punitive measures of this magnitude will almost certainly have a significant impact on U.S. automotive firms—and, indeed, are having one already—leading to higher input costs that either cut into profit margins or else are passed on to the consumer (or both). 

Since the Trump administration came into power earlier this year, the U.S. government has implemented a flurry of tariffs totalling 145% on Chinese imports

It’s important to remember, too, that we are only three months into this new era in U.S. trade policy. There’s a strong likelihood that the Trump administration isn’t finished with its trade conflict with China and its export empire, and manufacturers are already seeing their costs rise considerably. Understanding the auto industry’s reliance on Chinese manufacturing can help guide strategic thinking around how to diversify supply chains, and what components are most in need of diversification away from China. 

The Potential for Chinese Retaliatory Actions

Since January of this year, the Chinese Communist Party (CCP) has carried out several retaliatory measures against U.S. tariffs, first by imposing sectoral duties on American goods like cars, crude oil, agricultural machinery, and other agricultural products. Following President Trump’s reciprocal tariffs, however, China felt compelled to respond even more forcefully, and by April 12 the CCP had raised its tariff rate on many U.S. imports to 125%. In addition, the Chinese government has utilized other trade levers at its disposal, launching a regulatory investigation into Google and adding a dozen U.S. companies to various sanctions lists. 

If the CCP really wanted to inflict maximum damage on U.S. businesses, though, it could limit their access to China’s electronic component manufacturing. While such a drastic measure would deal a significant blow to China’s own export revenue and GDP, it would almost certainly have a devastating impact on American automakers. Examining the extent to which the global auto industry depends on China’s auto parts and electronic components can bring these consequential risks into even starker relief. 

If the CCP really wanted to inflict maximum damage on U.S. businesses, though, it could limit their access to China’s electronic component manufacturing.

The Viability of Supply Chain Diversification, Onshoring, and Nearshoring 

Before businesses actually carry out the in-depth work of restructuring their supply chains, it can help to see just where their China dependencies lie. Supply chain diversification is a complex, intensive process, and manufacturers can develop more precise strategies if they know what parts are most in need of new suppliers and alternative sourcing options. Sophisticated data visibility can give organizations the information and context they need to start thinking through what parts, subassemblies, and products would benefit from China+1, onshoring, and nearshoring strategies. 

Z2Data Electronic Components Analysis Methodology

To obtain the data found in the article, we began by looking at a broad sample of electronic components used in the automotive industry. To do this, we pulled data on the top five passive commodity types and the top five semiconductor commodity types for the automotive industry, based on the total manufacturing part numbers (MPNs) in our database (our searches focused exclusively on active parts). These figures ranged from nearly two million, for chip resistors, to a little over 6,000 for metal-oxide-semiconductor field-effect transistors (MOSFETs).

We pulled data on the top five passive commodity types and the top five semiconductor commodity types for the automotive industry, based on the total manufacturing part numbers (MPNs) in our database (our searches focused exclusively on active parts).

We then filtered these parts in two different ways: for parts with a country of origin (COO) of China only, and for parts in which at least one of the countries of origin is China. 

Finally, we searched for the total number of unique manufacturers producing these parts, the number of fabs producing the five semiconductor commodity types in this report, and the percentage of those manufacturers and sites that are headquartered or operating factories in China. 

The Auto Industry’s Dependency on China for IP&E Parts

The Z2Data analysis found that China is partially or fully responsible for a significant portion of the total number of interconnect, passive, and electromechanical (IP&E) parts used in the global automotive industry. Of the roughly 2.4 million active automotive parts in our database that are classified as either chip resistors, ceramic capacitors, through hole resistors, fixed inductors, or fixed capacitors, nearly 760,000 had China as at least one of its countries of origin (COO). Over 30% of automotive parts in these five critical commodity categories, in other words, pass through China during their manufacturing process. 

Of the roughly 2.4 million active automotive parts in our database that are classified as either chip resistors, ceramic capacitors, through hole resistors, fixed inductors, or fixed capacitors, nearly 760,000 had China as at least one of its countries of origin (COO).

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When we looked at the automotive parts with a COO of China only—that is, parts that were manufactured exclusively in China—the figure dropped considerably. Around 148,000 parts from these five categories, or roughly 6%, are manufactured entirely in China. 

The Auto Industry’s Dependency on China for Discrete Semiconductors 

We also looked at the top five semiconductor commodity types used in the automotive industry based on total MPNs, and the sector’s dependence on Chinese manufacturing for these components. Among the top five were four discrete semiconductors:

• Transient voltage suppressors (TVS)
• Zener diodes
• Rectifiers
• MOSFETs

In addition to these components, we also looked at one subassembly, microcontrollers, which is analyzed in the next section. 

The data our analysis yielded was striking. We were able to pull 85,467 unique, active discrete semiconductor MPNs among the four commodity types outlined above. Nearly 56,000 of these components, or over 65%, had China as one of their manufacturing inputs.

Even more revealing, arguably, is that 36% of these semiconductors have China as the only COO. In other words, if we use these four commodity types as a reasonable approximation of all semiconductors in the sector, then China is responsible for over a third of all the discrete chips used in the global automotive industry.

Microcontrollers Manufactured in China 

To gain insight into the global automotive industry’s dependence on China for manufacturing more complex subassemblies, we also looked at the microcontrollers made there.

Concentration of Auto Manufacturing Sites in China

In addition to component COO, the Z2Data analysis looked at the concentration of auto part manufacturing in China through the lens of suppliers and manufacturing sites. We traced the MPNs for the 10 commodity types back to a total of 189 unique suppliers all over the world. Over three-quarters of these suppliers—148, to be exact—have either their headquarters or one of their manufacturing locations in China.

Fabs for Automotive Industry Parts in China

Finally, we looked at the proportion of fabrication sites manufacturing semiconductors for the automotive industry that are based in China. These figures are generally in line with the COO data.

Key Takeaways 

There are several critical insights to take away from this data analysis. First, if we assume that the five semiconductor commodity types analyzed are a reasonably effective stand-in for all automotive chips, then it’s fair to say that the global automotive industry is reliant on China for a significant proportion of its semiconductors. This conclusion is supported by the fact that well over 50% of the 160,000-plus semiconductor MPNs that we looked at had China as at least one of its COOs. 

More importantly, arguably, nearly a third of those semiconductors were manufactured exclusively in China. This represents a fairly high degree of overreliance, and a supply chain dependency the $3.5 trillion-dollar auto industry should be reviewing carefully. We are now deeply entrenched in an era where supply chain agility and diversification has been widely accepted as strategic imperatives. Depending on China for such a disproportionate amount of semiconductors is a recipe for neither agility nor diversification. 

More importantly, arguably, nearly a third of those semiconductors were manufactured exclusively in China.

Second, while Chinese manufacturers are also heavily involved in producing passive components for the auto industry, only a modest percentage of IP&E parts are made exclusively in China. Given the nation’s historical dominance in manufacturing passive electronic components, this is somewhat surprising. It also suggests that automakers may have an opportunity to move parts of their passive component supply chain out of China completely with the implementation of some modest strategic sourcing measures. 

Finally, the evident prominence of China in manufacturing automotive chips offers a strong counternarrative to the idea that the nation is far behind its economic and geopolitical rivals in semiconductor manufacturing. While China may struggle to produce leading-edge chips—now generally considered to be semiconductors with transistor gate lengths of 5 nm and below—they are churning out a substantial amount of the legacy chips used in the automotive sector. While the raft of export controls the U.S. imposed against the PRC over the past few years may have hampered the nation’s capacity to manufacture advanced semiconductors, it didn’t impact their production of all the other chips used in key global industries. 

While China may struggle to produce leading-edge chips—now generally considered to be semiconductors with transistor gate lengths of 5 nm and below—they are churning out a substantial amount of the legacy chips used in the automotive sector.

Assessing Your Supply Chain Dependencies Is a Strategic Imperative 

In recent months, the risk landscape has become denser and more hazardous, with new tariffs, expanding export controls, and simmering geopolitical tensions. From a trade compliance perspective, this means that supply chains are as fragile as they’ve been in years, and businesses need to foster flexibility and resilience if they want to avoid disruptions and maintain manufacturing continuity. 

To do this, organizations need maximum visibility into suppliers, manufacturing sites, and countries of origin. Supply chain risk management (SCRM) platform Z2Data offers these data points through supply chain mapping, supplier insights, and a range of other valuable functionalities. On the Z2Data platform, companies can break down their products and see where all their components and materials are coming from, shedding light on dependencies and other critical vulnerabilities. 

To learn more about Z2Data and how it can help organizations map parts to suppliers and identify key supply chain dependencies, schedule a free demo with one of our product experts.