By Toby Sterling and Nathan Vifflin

AMSTERDAM (Reuters) – The chief executive of European computer chipmaker STMicroelectronics on Wednesday announced new plans to partner with Chinese foundry Hua Hong, arguing that having local manufacturing in China is vital to its competitive position.

The remarks by CEO Jean-Marc Chery come amid demands by the European, U.S. and Chinese governments for more chip manufacturing to take place locally, and as many chip firms have been expanding in Singapore and Malaysia to serve Asian markets.

But Chery, whose company is the biggest maker of energy-efficient Silicon Carbide (Sic) chips used in electric vehicles – with customers including Tesla and Geely – said the Chinese market proper is indispensable as the largest and most innovative for EVs, and it is not possible to compete adequately from outside.

“If we give up our market (share) in China to another company working in the field of industrial or in the field of automotive, the Chinese players, they will dominate their market,” he said.

“And their domestic market is so huge, it will be a fantastic platform for them to compete in other countries.”

He added that ST is adopting best practices and techniques it learns in the Chinese market for use in Western markets. “The missionary story is over,” he said.

Chery’s remarks to reporters in Paris were made after the company, which has been hard hit by a downturn in the market for industrial chips, updated its long-term financial forecasts at an investor day.

ST formed a SiC joint venture with Chinese firm Sanaan in 2023 in Chonqqing, with Sanaan providing wafers.

On Wednesday ST said it is working with Chinese foundry Hua Hong, China’s second largest bespoke chip maker, to manufacture microcontroller chips at the 40 nanometre node in Shenzhen by the end of 2025.

ST head of manufacturing Fabio Gualandris said other reasons to produce in China include cost benefits of local supply chains, compatibility issues, and the risk of government restrictions.

In addition, making chips anywhere else would mean missing out on China’s rapid EV development cycle.

“They go faster,” he said. “If you are not there you cannot react in time.”

(Reporting by Toby Sterling; Editing by Alexandra Hudson)