Midea Group, China's largest maker of home appliances, has been extending its reach into semiconductors, especially the microcontrollers used in household appliances. Despite hurdles, the China-based appliance maker, which also sees the US as its second largest market, is already eyeing the automotive IC sector - marking a trend gathering strength among Chinese manufacturers of consumer microcontroller units (MCUs).
China-based manufacturers of consumer electronics have long been dependent on foreign MCU supplies, but the latest chip shortage crisis has fueled the development of domestic MCU suppliers to increase supply chain resilience. Data from the Institute of Microelectronics under the Chinese Academy of Sciences indicate that China has a self-sufficiency rate of less than 5% when it comes to home appliance semiconductors.
After founding its semiconductior subsidiary, MR Semi Co. Ltd, in December 2018, Midea began to develop home appliance MCU products in 2019, followed by volume production in 2021, with an estimated 10 million units produced in total. Apart from MCUs, MR Semi's product portfolio also includes power semiconductors, power management ICs and IoT chips.
Information obtained from the database ChinaIOL indicates that the share of domestically made home appliance MCUs in China will have grown from 11.1% to a forecasted 22.3% since 2018, and is expected to reach 27.2% in 2023, even though demand for home appliance MCUs has not significantly grown.
Nevertheless, China's home appliance MCU market remains dominated by Japan-based Renesas Electronics, Germany-based Infineon, US-based Texas Instruments and Switzerland-based STMicroelectronics.
China's efforts to build a homegrown MCU industry will be challenged on multiple fronts. Given the already low price tags of MCUs, China-based microcontroller suppliers have little to benefit from the price-undercutting strategy often adopted by other domestic chipmakers.
The quality and by extension - reliability - of domestic MCUs is another major challenge. As a report by EDN China pointed out, while a failure rate between 300 - 1000 parts per million (PPM) is acceptable for consumer electronics, more stringent requirements for industrial and home appliances require a standard failure rate at 50 ppm. When it comes to auto-grade MCUs, failure rate requirement goes below 10 ppm, ideally 0 ppm.
Regardless of these challenges, Midea expects to successfully volume produce automotive MCUs in 2024, to be first used in the water pumps in EVs.
There is much catching-up to do though. As EETimes reported in June 2022, a fundamental difference exists between Chinese and global microcontroller markets. While automotive microcontrollers make up of approximately 33% of global MCU market, followed by industrial, medical, networking and consumer electronic sectors, Chinese microcontroller market, driven by the country's OEM industry, has been led by consumer-grade MCUs with a 26% share, followed by automotive and industrial.
As indicated by the '2023 Asia Supply Chain Top 100 Market Cap Companies Ranking' published by DIGITIMES Research on Jan 5, Midea Group's market capitalization has dropped 35.2% between 2021 and 2022, with its market cap estimated at US$52.5 billion.
