BYD's tepid stock reaction after launching 4nm self-driving chip

BYD unveiled its self-developed semiconductor chip "Xuan Ji A3" on Thursday, which supports L3 to L4 level autonomous driving, with a computing power of 2100 TOPS for its trio of chips. Founder Wang Chuanfu personally presented the new chip at the launch event, claiming that BYD is the world's first vehicle company with the ability to design chips to the entire chain of wafer manufacturing and testing.

The reaction from the capital market was far from enthusiastic. BYD's Hong Kong stocks fell by about 1% on Friday, but eventually recovered and rose by about 2%. The stock price of the supplier Horizon Robotics plummeted by nearly 10% at one point, and the decline of Black Sesame Intelligence once reached 5%. The market's concern about BYD's self-developed chips replacing external suppliers was directly conveyed to related targets.

Citi analysts pointed out in research reports that Xuan Ji A3 may compress the cost of assisted driving hardware to about one-third of the Nvidia Thor-based plan, significantly reducing the cost pressure of models priced between 80,000 and 300,000 yuan. Citi also expects that the real turning point for BYD's stock price may not occur until mid to late June, when profitability visibility and new business progress may become clearer.

However, the industry still has doubts about the commercial prospects of Xuan Ji A3. An unnamed executive from a domestic automotive chip company said that it is expected to be mainly used within BYD due to the irreplaceability of TSMC's advantages in stability and yield rate, and it is difficult to output externally. In comparison, XPeng has integrated its self-developed Turing chip into Volkswagen's models and is negotiating supply with other car companies, making its externalization path clearer.

BYD's net profit in the first quarter of this year was halved year-on-year, setting a record of continuous profit decline for the fourth quarter, and its sales volume has also been declining for eight consecutive months. The launch of this chip is regarded as an important measure to boost sales and strengthen the brand of intelligence, but whether it can reverse the growth trend is still being observed by investors.

An analyst at Citi believes that BYD's action will reshape the competitive landscape, forming a disruptive pressure on domestic new forces. However, BYD's high-end brands like Auxun and Tengshi are expected to continue to搭载 the flagship chips from NVIDIA.