December 31, 2024 /SemiMedia/ —  Leading German semiconductor manufacturer Infineon Technologies is localizing the production of some of its standard products in China to better align with local customer demands. In an interview, CEO Jochen Hanebeck explained that Chinese customers are requesting the localization of production for parts that are difficult to replace. As a result, Infineon plans to shift some of its product manufacturing to foundries in China and leverage its back-end production capabilities there to meet customers' supply chain security concerns.

Infineon established a manufacturing base in Wuxi, China, back in 1996, focusing primarily on back-end assembly and packaging. Currently, the company does not have any wafer fabrication facilities in China. The new plan will involve outsourcing some front-end manufacturing to Chinese foundries. Hanebeck did not disclose the specific share of production to be localized, stating that it would depend on the product category and market conditions. He emphasized that Infineon is also committed to localizing the production of advanced power semiconductors in its factories in Europe and Southeast Asia.

A global leader in power semiconductors, Infineon’s products are widely used in electric vehicles, data centers, and other sectors. With rising tensions between the U.S. and China, the latter is working to boost its domestic semiconductor manufacturing capacity. Infineon’s localization strategy will support the stable development of the Chinese market. Additionally, Infineon has its Greater China headquarters in Shanghai, which supports its R&D efforts to meet local demand.

Other European chipmakers are also taking similar steps. STMicroelectronics has announced a partnership with China-based Hua Hong Semiconductor, which will manufacture 40nm microcontroller units (MCUs) in China by the end of 2025. CEO Jean-Marc Chery stated that the Chinese market is vital to STMicroelectronics, particularly in the electric vehicle sector. He emphasized that local manufacturing in China is essential for enhancing competitiveness.

NXP Semiconductors has also revealed plans to establish a chip supply chain in China. Andy Micallef, NXP’s Executive Vice President, disclosed the plans during the groundbreaking ceremony for the VSMC wafer fab. He highlighted that China is the largest market for electric vehicles and telecommunications, and NXP is seeking ways to set up production in the country. NXP currently operates a back-end packaging and testing facility in Tianjin but does not have front-end manufacturing operations there. With the construction of the VSMC wafer fab, NXP may eventually expand its manufacturing presence in China. The first VSMC wafer fab is expected to begin mass production in 2027, producing mature-node chips (130nm to 40nm) for automotive, industrial, consumer, and mobile applications.

However, the trend toward localization has raised concerns among European chipmakers about the fragmentation of global supply chains. CEOs from Infineon, STMicroelectronics, and NXP have warned that efforts by the U.S., China, and Europe to expand their respective semiconductor manufacturing capabilities could lead to supply chain fragmentation and rising costs. They stressed that global cooperation is critical to avoid excessive costs and ensure the sustainability of the industry.