By: David Wolf
In March, global semiconductor giant Intel announced its acquisition of Mobileye, an Israeli firm that has developed a key sensor technology for intelligent automobiles, and whose products complement Intel’s in this area. The move brings Intel nearer to its goal of offering a complete technology platform for autonomous vehicles and hands-free driving, an integrated set of capabilities that will essentially become an industry standard, similar to how its microprocessors have dominated in computing.
Despite a busy month for the Chinese government, Intel’s move did not go unnoticed. The acquisition received broad coverage in China’s media, and is the focus of considerable speculation online.
China’s leaders understand that soon they will have to choose between pursuing policies to encourage the development of a home-grown substitute for the Intel-Mobileye platform, or policies that will encourage others to build their own innovations atop Intel’s platform.
Initially, at least, the former course appears likely for several reasons:
The facts above raise two questions: when will China begin this effort, and how will the global industry respond?
Chinese companies like BYD, Shanghai Automotive, SMIC, Tencent, and Baidu each currently possess different pieces of what might evolve into a Chinese platform. Unsurprisingly, then, talks to form consortia to develop integrated platforms are likely already underway.
China will likely move soon. When it does, non-Chinese companies in the intelligent vehicle market will be faced with having to fight domestic competition in a market where the government has no compunctions about ignoring WTO guidelines on behalf of fledgling industries.
For their part, non-Chinese companies in the space can ill-afford to surrender the massive China market. More than any other market, China offers the necessary scale to build global competitive advantage. Abandon China, lose the world.
Continued engagement in China is essential. But to win a meaningful piece of the market, companies will have to demonstrate to Beijing and the nation’s automotive industry that China is better off with them than without them.
David Wolf is a partner and managing director of Allison+Partners’ global china practice.
[i] Dieter Ernst, From Catching Up to Forging Ahead: China’s New Role in the Semiconductor Industry, (Honolulu, The East-West Center, 2015) p.viii