China Pushes Semiconductor Self-Reliance
China's semiconductor industry is accelerating with record government investment aimed at achieving tech sovereignty amidst US export controls. Reports indicate chipmakers are repurposing old LCD manufacturing lines for chip production and achieving improved 7nm yields. In a potential policy shift, the US government has reportedly removed chipmakers CXMT and YMTC from a list of restricted Chinese tech firms.
- China's "Big Fund," also known as the National Integrated Circuit Industry Investment Fund, has been a primary vehicle for this investment, with its third phase raising approximately $48 billion. Since 2014, total state-led investment commitments in the semiconductor sector are estimated to have surpassed $150 billion. - Semiconductor Manufacturing International Corporation (SMIC), China's largest chipmaker, is producing 5-nanometer chips for Huawei. This has been achieved using existing deep ultraviolet (DUV) lithography equipment, bypassing the need for the most advanced extreme ultraviolet (EUV) machines which are subject to export restrictions. - While this domestic production demonstrates progress, the manufacturing cost for these 5nm and 7nm chips is reportedly 40-50% higher than those produced by industry leader TSMC, with a significantly lower yield rate. For instance, the yield for 5nm chips is estimated to be around 30-40%. - The drive for self-sufficiency extends to semiconductor manufacturing equipment, with investment in this sub-sector surging by over 53% in the first half of 2025. The broader "Made in China 2025" initiative set a target for 70% self-sufficiency in semiconductors by 2025, a goal that is now considered unlikely to be fully met. - In a recent policy development, a bipartisan group of U.S. lawmakers has called for a blanket ban on the sale of all advanced semiconductor manufacturing equipment to China, arguing that entity-specific restrictions are insufficient. - The intensifying U.S.-China tech competition is leading to a potential fragmentation of global technology standards, with concerns that a "forking" of standards in areas like the open-source RISC-V semiconductor architecture could emerge. This could create parallel ecosystems and reduce interoperability. - Despite U.S. export controls, China's spending on wafer fabrication equipment increased by 170% between 2018 and 2023, reaching nearly $30 billion. In the third quarter of 2023 alone, imports of chip-making equipment rose by 93%. - The long-term strategy includes significant investment in talent, with STEM education being a national priority to close the technology gap. In 2020, over 22,800 new semiconductor companies were registered in China, a 200% increase from the previous year.
