CHina’s $47 billion investment fund for the semiconductor sector, launched in May last year, has set out to strengthen the domestic chip industry. Semiconductors, often referred to as “the new oil,” are critical across sectors such as electronics, automotive, and telecommunications, driving innovation and global competitiveness. Chinese investment funds, led by Semiconductor Manufacturing International Corporation (SMIC), aim to localize production and reduce dependence on foreign technology.
The Chinese government has developed policies such as the National Integrated Circuit Industry Development Promotion Guideline to provide a framework to accelerate growth in this vital sector.
Moreover, US containment and supply chain restructuring policies are backfiring as China emerges as a strong competitor in the semiconductor sector, especially in areas such as artificial intelligence, low-power chip design, packaging, and lithography. It’s helpful.
View full article
Impact of US-China conflict
From China’s perspective, US technology regulations are both a challenge and an opportunity. The United States has long maintained global dominance through its technological and economic supremacy, but China’s influence has steadily expanded as Chinese semiconductors enter the global market. China’s semiconductor industry advanced rapidly, despite U.S. efforts to impede its progress. Many Chinese commentators see the ongoing U.S.-China conflict as a catalyst for growth in the semiconductor sector rather than an existential threat.
This article is not paywalled
But with your support, we can continue to bring you impactful stories, trusted interviews, insightful opinions and on-the-ground reportage.
Some China experts say that while U.S. export controls have restricted some of China’s imports from the U.S., the overall impact on China’s semiconductor procurement is relatively small. China continues to rely more on Japan for semiconductors, then the Netherlands, and has significantly reduced its dependence on the United States. As U.S. export restrictions extend to allies such as Japan, the Netherlands, South Korea and Taiwan, China is diversifying its supply chain and exploring alternatives, including Singapore, Malaysia and several European countries.
The prevailing view in China is that US sanctions are inadvertently accelerating China’s technological progress. The so-called “showdown of the century” between the two countries’ semiconductor industries has driven Chinese innovation through market demand and U.S. regulations. This has established China as a strong contender for global leadership in high-tech manufacturing. Chen Jing, a prominent technology commentator, argued that the U.S. government’s actions accelerated China’s development in chip design, equipment production, and wafer fabrication, ultimately fostering its strongest rival. Hu Xijin, former editor-in-chief of the Global Times, argues that the rapid expansion of China’s semiconductor sector is providing the world with alternatives to American chips and contributing to global technology diversification. While Hu acknowledges that Chinese industry remains behind in some advanced technologies, he argues that U.S. sanctions are hurting American companies by restricting access to key markets.
Many in China predict that chip competition will intensify in 2025. Yu Yongding of the Chinese Academy of Social Sciences suggests that potential tariffs by President-elect Donald Trump could intensify the trade war. In December 2024, the United States initiated Section 301 investigations into China’s mature semiconductors (defined as chips using 14nm or 28nm processes). The Weibo handle Beijing News described this as “technology bullying” by the United States.
Due to US regulations on advanced technologies, Chinese manufacturers such as SMIC have successfully increased their 28nm production capacity, turning the mature semiconductor into a key area for domestic localization and adoption of “Made in China” chips. By 2024, China’s share of the global 28nm-65nm process market will increase from 18% in 2020 to 31.5%. Additionally, global companies such as STMicroelectronics and Qualcomm are moving orders to Chinese wafer fabs, further strengthening China’s semiconductor ecosystem.
Also read: India should do more than just watch the US-China chip war. It’s a strategic opening.
Strategic investment, industry expansion
China’s semiconductor industry has experienced significant growth in recent years, especially in memory chips, wafer foundries, and chip equipment. The domestic semiconductor equipment market grew 40 times from 2008 to 2023. Companies such as North Huachuang and China Micro have shown strong market performance, while companies such as China Resources Micro, HiSilicon, and BYD Semiconductor have made significant progress in areas such as: Chips for the Internet of Things, communications, and new energy vehicles. In 2023, Chinese semiconductor equipment company NAURA entered the world’s top 10, highlighting China’s growing influence in the global semiconductor field.
Chinese chip design companies are currently expected to capture 15% of the global market share. By 2022, China will already account for more than 20% of the world’s wafer manufacturing capacity, and by 2032, production is expected to increase by 86%. Wei Shaojun, chairman of the China Semiconductor Industry Association, predicted that more than 3,600 Chinese chip design companies would generate sales. By 2024, it will exceed USD 646 billion, and 731 companies will have revenues of over USD 100 million.
outlook
Although China’s semiconductor industry has made significant progress, it still faces challenges such as a lack of high-end materials, advanced lithography equipment, and skilled labor. To address these, China is focusing on government investment and international partnerships to drive growth and leadership.
Although China excels in producing low-end chips, it has yet to dominate the high-end market. To fill this gap, China is pursuing mergers and acquisitions in areas such as electronic design automation (EDA) and analog chips. Government policies aimed at market integration are expected to accelerate innovation.
With continued support and technological advances, Chinese companies are closing the gap with global leaders. However, China’s discourse suggests that for China, achieving semiconductor self-sufficiency and leadership will require sustained investment, innovation, and strategic alignment with national priorities while maintaining global engagement. It will be.
Sana Hashmi is a fellow at the Taiwan Asia Exchange Foundation. She tweets @sanahashmi1. Views are personal.
(Edited by Prashant)
