De-Risking or Deep Dependency? Why Mercedes-Benz Locked Arms with China’s Power Chip Giant

The Geopolitical Irony: Mercedes-Benz and the China Semiconductor Paradox

In the wake of supply chain crises and escalating geopolitical tension, Western automakers have preached the mantra of “de-risking.” Yet, a recent move by one of the world’s most premium brands suggests a fundamental pivot: a strategic surrender to China’s superior velocity in power electronics.

On December 2nd, Mercedes-Benz signed a long-term cooperation agreement with Yangjie Technology, a major Chinese Integrated Device Manufacturer (IDM). This is not a simple, one-off purchase; it follows nearly two years of rigorous application and verification, signaling that a core segment of Mercedes-Benz’s future vehicle architecture—specifically, power components—will be deeply reliant on a Chinese supplier.

As an Auto Market Insight Analyst based in China with over 10,000 posts’ worth of data experience, the picture is clear: the West’s pursuit of premium performance and supply chain security is now directly at odds with the reality of China’s technological dominance in essential EV components.

The Core Challenge: Premium Performance vs. China Speed

Mercedes-Benz is on the defensive in its largest market, China. The CEO has acknowledged the “tough” competition from local electric vehicle (EV) brands, while simultaneously pledging to accelerate the company’s cooperation and R&D investment within the country. This agreement with Yangjie Technology is a direct reflection of that pressure.

Why Yangjie Technology is a Critical Supplier

Yangjie Technology is one of the few Chinese firms operating a fully vertical IDM model—controlling the process from chip design and manufacturing to packaging and testing. This vertical integration is precisely what premium OEMs need to secure supply, cut costs, and accelerate development.

• Power Electronics Portfolio: Yangjie’s product line includes discrete semiconductors, MOSFETs, and critically, IGBTs and SiC (Silicon Carbide) power modules. These are the components that manage and convert power flow in electric vehicle batteries, charging systems, and motor control.
• Supply Chain Security (Local): By sourcing from a local, vertically integrated partner, Mercedes-Benz gains resilience against global logistical shocks, a key lesson learned from the past chip crisis. The company already secured a short-term chip supply amidst the Nexperia/Wingtech disruption, highlighting its acute vulnerability to geopolitical supply chain risks.
• Technology Co-Development: The long-term nature of the deal suggests Yangjie will leverage Mercedes-Benz’s global network and cutting-edge use cases to refine its own SiC and IGBT technology, fueling a continuous feedback loop that elevates Chinese domestic technology.

The Geopolitical Irony: A Calculated Risk in a Fracturing World

The strategic irony of the Yangjie deal cannot be overstated. Western governments and auto executives are actively seeking to diversify away from China—a policy known as ‘de-risking.’ Yet, Mercedes-Benz is strategically placing a cornerstone of its electrification program (power modules) firmly within a Chinese supply chain.

The context surrounding Yangjie Technology further complicates this decision. According to customs records, Yangjie has been implicated in the supply of ‘high-priority’ electronic components to Russian entities, some of which are subject to U.S. sanctions, since the start of the 2022 invasion. This exposure introduces a significant and undeniable geopolitical risk to Mercedes-Benz’s core component procurement.

In essence, the move confirms a hard truth for European and US automakers:

The price of maintaining premium technological parity and cost competitiveness in the global EV race is an ever-increasing reliance on China’s core component supply chain, despite the rising geopolitical risks.

This isn’t just about manufacturing scale anymore; it’s about technological capability in the new energy vehicle era. Mercedes-Benz’s calculation is that the performance and security offered by a high-caliber Chinese IDM like Yangjie outweighs the inherent geopolitical baggage.

Recommended Reading (Amazon)

For a deeper understanding of the underlying power struggle that makes this Mercedes-Benz/Yangjie deal so critical, we recommend:

• Chip War: The Fight for the World’s Most Critical Technology by Chris Miller. The book brilliantly chronicles how microchips—the new oil—have become the center of a geopolitical contest between the US and China. The battle for control over SiC and IGBT production, which Yangjie is now supplying, is the commercial manifestation of this ‘Chip War.’

Conclusion: A New Era of Western Dependency

The Mercedes-Benz and Yangjie Technology partnership is a microcosm of the new global auto landscape. For the Western audience, it serves as a wake-up call: the discussion is no longer about whether to compete with China, but how to manage a deepening technological dependency on a high-tech Chinese supply chain for core EV components. The long-term agreement is a powerful signal that for Europe’s premium automakers, efficiency and access to cutting-edge power electronics now supersede the geopolitical imperative to fully de-risk.