(Yicai Global) July 6 -- Time is running out for China's fast-growing automotive chip startups that have fattened their balance sheets this year as eventually, a select group of few market leaders will emerge, according to industry insiders.

Many domestic stars in the sector will emerge in the near future, per Zhao Wenjun, managing partner of Hundreds Capital. However, the industry is expected to follow the pattern of consumer electronics, where most of the producers will eventually vanish amid industry concentration, and a few leading suppliers will fight for capacity dominance, Zhao added.

Some 69 of the 98 financing events announced in the domestic smart electric vehicle industry in the first half of this year were about intelligent driving while the hottest segment is smart chips, Gasgoo, an automotive media outlet reported recently.

Dominant players are distinguished by their broad scope. Industry leaders of the future will not only produce chips, but also develop their own chip design tools and ecosystems, and receive support from industrial capital and carmakers, Zhang Junyi, managing partner of American management consulting firm Oliver Wyman in China, said to Yicai Global.

There is room for growth as the global automotive chip market was worth CNY310 billion (USD42.8 billion) in 2022 and is expected to surpass CNY600 billion by 2030, creating significant growth opportunities for market players, according to Frost & Sullivan.

Blue Ocean

"As the demand for self-driving technology grows, chip startups are tapping into a blue ocean market that is not dominated by existing players," Yang Yuxin, chief marketing officer of chip firm Black Sesame Technologies, told Yicai Global in an interview.

Startups are competing for new opportunities in the field of system-on-chips chips which integrate multiple functions on a single chip, according to the CMO of the company that filed for an initial public offering in Hong Kong in June. SoC chips are more advanced than microcontroller units, another type of automotive semiconductors, as they can perform autopilot functions.

Car companies usually favor established suppliers over new ones, but the rapid development of fresh technologies and cost reduction pressures are making them look around for more innovative solutions. This creates opportunities for newcomers who master cutting-edge technologies, Yang added.

The CMO also said that auto companies are supporting local chipmakers to secure their supply chains, which also means opportunities for new entrants. Right now, domestic firms can make the majority of essential car chips, but some of the products are not mass-produced yet.

China currently has over 100 companies that develop automotive chips, and over 50 listed semiconductor firms that offer automotive products, according to the China Automotive Chip Industry Innovation Strategic Alliance.

Editors: Tang Shihua, Emmi Laine