Joint venture: SAIC Infineon Automotive Power Modules

At Datenna, our China experts continuously track and conduct detailed investigations into joint ventures established between European and Chinese entities located in China. Through a series of articles in our resource library, we highlight striking EU-China joint venture case studies, analysed based on Datenna's in-depth, unique data on China's techno-economic landscape. This article elaborates on the joint venture "SAIC Infineon Automotive Power Modules", established by Infineon Technology and SAIC Motor.

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Infineon Technologies in China

Infineon Technologies AG is one of the largest semiconductor manufacturers worldwide. Spun off from Siemens AG's semiconductor operations in 1999, the company's core business involves the production of semiconductors and systems for automotive electronics, industrial applications, and consumer-oriented applications. It has subsidiaries worldwide and several facilities across Europe.

Infineon first entered the Chinese market in 1995 (while still part of Siemens), establishing a wholly foreign-owned enterprise in Wuxi. It subsequently established headquarters in Shanghai, an R&D centre in Beijing, and a branch in Shenzhen. Datenna estimates the company has invested around €286 million in China over the years.

To better serve the dynamically growing electric vehicle market in China, Infineon Technologies established a joint venture with SAIC Motor Corporation Limited for the production of power modules. SAIC Motor — the largest car manufacturer in the Chinese market — holds 51% of the joint venture's shares, while Infineon holds a minority share of 49%.

SAIC: A Major State-Owned Enterprise in the Car Industry

The Chinese partner, SAIC Motor, is the largest automaker in China, engaged in activities ranging from vehicle R&D to production and sales, including new energy vehicles. In April 2020 alone, SAIC sold 419,500 vehicles, including 50,000 NEVs — in line with the Chinese government's mid-term goal of 5 million new energy vehicles by end of 2020.

The two companies display relevant synergies. The joint venture produces power module semiconductor solutions for EVs in China, allowing Infineon to expand its production capacity in the country while providing SAIC with technologically advanced chips for new energy vehicle production.

Chinese Ambitions in the Semiconductor Sector

Since the joint venture involves chip manufacturing for NEVs, it is important to examine the Chinese government's goals in the sector. Advanced semiconductors remain a field in which China is still largely dependent on external supply. To close this gap, China has spent tens of billions of dollars building its own semiconductor industry over the last decade — though Chinese semiconductor companies have so far struggled to capture meaningful global market share.

To counter its dependence on foreign suppliers, the State Council announced the National Guidelines for Development and Promotion of the Integrated Circuit Industry in 2014. The following year's Made in China 2025 initiative further committed China to deploying significant resources to build a self-sufficient semiconductor industry. Financial benefits — including tax exemptions and proximity to end customers — are offered to foreign investors to incentivise domestic manufacturing. While these benefits can justify market entry, they also raise concerns for Europe about technology drain and loss of know-how to a country that is fast becoming a serious competitor in the sector.

The Level Playing Field in the NEV Sector

With the most recent version of the Negative List on Foreign Investment issued in 2020, the Chinese government planned to remove the 50% restriction on foreign ownership in automobile manufacturing joint ventures by 2022. The restriction has already been lifted for companies solely producing pure electric vehicles in China. Nevertheless, prospects for foreign companies in China's NEV sector remain limited. New investment projects for NEVs by a foreign firm can only proceed under specific conditions: the utilisation rate of automobile capacity in the relevant province must exceed the two-year average for the same product category; all existing pure electric vehicle investment projects in that province must be complete and at projected output scale; and the investment project must be worth no less than USD 1 billion at proposal stage.

Even with softened entry restrictions, it remains difficult for foreign companies to establish production activities independently in China's automotive sector. This is not the case for sub-sectors like semiconductors, which still actively attract foreign investment — likely as an attempt to access and master relevant know-how from foreign entrants.

Foreign multinationals like Infineon may benefit financially from entering the Chinese market, but risk overlooking the knowledge drain when setting up an entity over which they have no full control. On a broader level, this could lead to a significant loss of intellectual capital in Europe.