We See Things
Differently

Our latest news and opinions.

MAY 18, 2017 //  

Intelligent Automobiles: Why Beijing Will Not Let Intel Drive China's Smart Car Industry

Intel

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:

  • Intel’s move touches three large strategic industries: semiconductors, which have been identified as a key area of focus in the coming decade[i]; automobiles, a sector wherein China is determined to build domestic brands with international markets; and transportation, where the interaction between smart highways and autonomous vehicles has become a focus of regulators seeking ways to ease traffic congestion in China’s cities.
  • China is set to become the world’s largest automotive market in the very near future. China’s policymakers are keen to control the supply chain for all products for which there is high domestic demand.
  • Electronics have now surpassed the engine and drive train as being the most costly - and most profitable - system in the automobile, and the advent of intelligent and autonomous vehicles will accelerate that trend.
  • The intelligent car platform will likely be the highest value-add part of the vehicle, and Beijing is focusing its support on industries and sectors that can retain the highest proportion of value.

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.  

Notes:

[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

 

The Stream

Articles + Opinions Delivered Directly to your Inbox.

Sign Up today!

MENTAL_FLOSS // MAY 17, 2017
The 3 Things Never Allowed in a Disney Movie — t.co/xLlWwWp8CP t.co/KVYBDkzMNj
SALON // MAY 17, 2017
An unnamed European official has told the Associated Press that his country may stop trusting America with secrets t.co/duc6RYBnm9
THEAVCLUB // MAY 17, 2017
Netflix to produce a series based on The Witcher t.co/5WzNzU0CTR t.co/yAmYeupWvH
ADFREAK // MAY 17, 2017
.@DeutschInc's @petefavat picks his three favorite ads: t.co/K7EfqjrPmF @CocaCola @BurgerKing @Honda… t.co/kzdYCHasJg
VULTURE // MAY 17, 2017
Ridley Scott and Michael Moore are developing presumably unrelated sci-fi and political shows for TNT t.co/p6BaLUhVRt
LANCEULANOFF // MAY 17, 2017
Ransomware hackers are so desperate to explain Bitcoin they've set up IT departments t.co/c0IGYKhGS1
SETHMEYERS // MAY 17, 2017
Simon Rich is one of my favorite writers and therefore this is exciting news. t.co/zfXTU8mMGf
FMANJOO // MAY 17, 2017
Google and other tech giants are building the future. The American government isn't. My @nytimes column… t.co/mrppUu8hYn
BUSINESSINSIDER // MAY 17, 2017
Here's what popular dog breeds looked like before and after 100 years of breeding t.co/8n1lRIdgZQ
BRAINPICKER // MAY 17, 2017
Patti Smith reads her beautiful letter to Robert Mapplethorpe about what he taught her about being an artist… t.co/Xjbgy8Fsyu
ERICTTUNG // MAY 17, 2017
Should #socialmedia platforms be forced to allow users to delete their entire pre-Age 18 posting history?… t.co/aSJJoIfAYm
BUSINESSINSIDER // MAY 16, 2017
A Russian billionaire with ties to Putin is suing AP over a story on Trump campaign ties t.co/M3LQYHuAk6 t.co/2NVkQBrfaS
MENTAL_FLOSS // MAY 16, 2017
This Photography Book of Concrete Architecture Comes With a Concrete Cover — t.co/IBmFkmXtxK t.co/cMvEqxhOaT
BRIANSTELTER // MAY 16, 2017
This is the tweetstorm to end all tweetstorms t.co/Fgkl5movA1
ADFREAK // MAY 16, 2017
Ad of the Day: Insane @Pepsi ad has crystal wolves, digital ninjas and stone monsters as the ultimate villains.… t.co/VMLUQT9P8E
VULTURE // MAY 16, 2017
"Getting stuck in a car is exactly what happened to us in real life." @azizansari recaps @MasterofNone episode 2 t.co/pqsEaIi4Xw
MDCPARTNERS // MAY 16, 2017
.@EffieAwards Judge Spotlight: Martin Cass, CEO, MDC Media Partners & @MediaAssembly t.co/0amJZs2se1
BRAINPICKER // MAY 16, 2017
Reclaiming friendship—a visual taxonomy of platonic relationships to counter the commodification of the word "frien… t.co/5newUldmVh
BRIANSOLIS // MAY 16, 2017
What's the difference between innovation and iteration? [VIDEO] t.co/HW1iPDlyjW