Global Semiconductor Race Intensifies with New Investments
The global competition for semiconductor leadership is escalating, with China reportedly ramping up its advanced chip output by five times through companies like Huawei and SMIC. Concurrently, Dutch firm ASML plans to boost its EUV machine production capacity by 50% by 2030 to meet demand. The U.S. and India are also strengthening their collaboration through a "Pax Silica" pact aimed at securing semiconductor and AI supply chains.
- China's latest semiconductor investment fund, known as "Big Fund III," has amassed 344 billion yuan (approximately $47.5 billion) to bolster its domestic chip industry and counter U.S. export restrictions. This new fund will focus primarily on investing in chip manufacturing equipment. - Despite being restricted from purchasing the most advanced Extreme Ultraviolet (EUV) lithography machines from ASML, SMIC is reportedly proceeding with 5nm chip development using older Deep Ultraviolet (DUV) equipment. However, this method presents significant challenges, with expected yields around 30% and production costs potentially 50% higher than those of industry leader TSMC for the same process. - ASML's next-generation High-NA (Numerical Aperture) EUV systems, crucial for producing chips at the 1.4nm and 1nm nodes, are priced at approximately $380 million each. Intel has already installed the industry's first commercial High-NA EUV tool, with Samsung and SK Hynix also placing orders to stay competitive in the production of advanced AI processors. - ASML projects a significant increase in production, aiming to deliver 56 Low-NA EUV scanners and 10 High-NA EUV scanners in 2027 alone. This expansion is driven by surging demand from the AI and high-performance computing sectors. - The "Pax Silica" initiative is a U.S.-led strategic alliance aimed at building a secure and resilient global supply chain for semiconductors and AI. The name combines the Latin word for peace ("Pax") with "Silica," referring to the silicon that is foundational to computer chips. - India formally joined the Pax Silica alliance in February 2026, a move intended to bolster its domestic electronics and semiconductor industry and reduce dependency on single-country supply chains, particularly for critical minerals. Other members of the alliance include Australia, Japan, South Korea, the United Kingdom, and several other nations. - The U.S. implemented extensive export controls in October 2022, and expanded them in subsequent years, to restrict China's access to advanced semiconductor technology and manufacturing equipment, citing national security concerns. These controls aim to limit China's capabilities in advanced AI and military applications. - While these U.S. export controls have slowed the growth of China's domestic chipmaking capability, they have not stopped Chinese firms from developing competitive AI models. However, the lack of access to the most advanced hardware has limited the ability of Chinese companies to establish significant AI infrastructure outside of China.
