already 70% autonomy in this industry
According to the Semiconductor Industry Association (SIA), the global semiconductor market in 2023
at $526.8 billion. At the same time, the market is expected to continue to grow, and by 2030 its volume may reach $1 trillion due to the increasing demand for electronics and the Internet of Things (IoT).
In this industry, China plays an important role, striving to become a world leader in chip production. Over time, China has more and more companies that produce not only chips, but also lithographs and other equipment. And yes, according to experts, China is 70% independent of Western technology – and the degree of autonomy is only growing over time.
Where it all began
The semiconductor industry is the backbone of the modern global economy, without which the telecommunications, defense, and industrial systems industries would not exist. Beijing has long dreamed of global leadership in high technology and back in 2015 initiated the “Made in China 2025” program to develop its own electronics industry. The project included two key goals, namely increasing the share of semiconductor production to 40% by 2020 and to 70% by 2025.
China's rise as a major chip maker will impact both global semiconductor supply chains and the economies of countries that rely on chip exports. For example, Taiwan Semiconductor Manufacturing Company (TSMC), one of the largest companies produces 90% the world's most advanced chips. China continues to import about 60% of the world's most advanced chips. As these roles shift, the balance in the semiconductor industry will change. But overall, the global industry is adapting to these changes — at least so far, there are no critical problems.
Investments and technological advances
In recent years, China has been investing heavily in semiconductor R&D. In 2023 alone, China invested about $143 billion in the sector. This also included subsidies and incentives for companies involved in chip design and production. The China Integrated Circuit Industry Investment Fund was also replenished with $28.9 billion last year, making it one of the largest semiconductor investment funds in the world.
According to the “Made in China 2025” strategy, semiconductor companies are required to use at least 70% of their technology domestically. As a result, SMIC, one of China’s leading semiconductor manufacturers, has succeeded in developing and producing chips using the 7-nanometer process technology. This is a significant achievement, especially in the context of supply constraints for advanced equipment such as extreme ultraviolet (EUV) lithography machines.
China is also working on creating its own processor to reduce its dependence on products from Intel, AMD and other companies. The idea of creating it has become especially relevant after the introduction of export restrictions on Western developments. The pioneer in this direction was BLX IC Design, founded in 2002 with state support. Initial efforts led to the creation of a series of Godson microprocessors, which were later renamed Loongson.
Of particular note are the Loongson 3A5000 and 3B5000 chips, which have been available since 2021. were produced on a 12-nm process technology. These chips use the Loongarch architecture, based on the refinement of the MIPS64 architecture.
Chinese companies have also contributed to the development of their own processors. Thus, the Kirin series chips for mobile devices and Kunpeng for servers were developed. The Kirin 9000 processor, manufactured using a 5-nm process technology, was one of the first in the world to be combined with a 5G module. Kirin 9000S became the first mobile ARM processor to support hyperthreading technology, which is common for Intel and AMD chips.
The Kunpeng series of processors is designed for servers and data centers. The ARM-based chips are designed for high-performance computing tasks such as cloud computing and big data processing. They provide high performance with low power consumption.
Source
Another company, Zhaoxin, a joint venture with the Chinese government, makes the KaiXian series of processors for desktops and servers. These chips
on the x86 architecture to ensure compatibility with existing software. KaiXian processors are intended for use in government and commercial sectors as an alternative to solutions from Intel and AMD.
Successes and failures in the semiconductor industry's self-sufficiency
According to insider information, there is an unspoken rule among Chinese semiconductor foundries that 70% of their production lines must be made up of locally made tools and equipment. Two of China's largest semiconductor companies, NAURA and AMEC, were the first to use domestic equipment in their fabs. Other major Chinese players such as SMIC, YMTC, and CXMT are also actively integrating and developing domestic technologies.
Gerald Yin Zhiyao, chairman and CEO of AMEC, was confident that China would achieve a basic level of self-sufficiency in chip-making equipment by this summer, something that seemed impossible a few years ago. But he acknowledged that the quality and reliability of Chinese solutions still lag behind global standards.
True, such a high level of technological autonomy is not available in all companies and not in all areas. Chinese manufacturers reached self-sufficiency levels of 15% or more for materials needed for mature process technologies such as silicon wafers, photoresists, and electron gases. However, self-sufficiency for critical items such as photolithography equipment and EDA software remains below 15%.
There are also problems with EUV and DUV systems, which are necessary for the production of modern processors. But China continues to purchase products from the Dutch company ASML. We are talking about lithographs, which are essential for the production of modern processors. China is also developing its own solutions, but for now it depends on tools from partners. In the second quarter of this year, ASML equipment deliveries to Chinese customers amounted to $2.58 billion, that is, almost half of its total sales. For comparison: in 2023, only 1.2% of lithographic systems used in Chinese factories were purchased from local suppliers.
In addition to lithography, China faces insufficient self-supply of ion implantation systems and inspection and metrology systems. The country purchases 1.4% and 2.4% of the required volumes from domestic manufacturers, respectively. At the same time, in 2023, imports of ion implantation systems to China increased by 20% compared to the previous year, reaching $1.3 billion. In particular, Chinese fabs are heavily dependent on metrology systems supplied by companies such as KLA, Applied Materials, and Japan's Hitachi.
What do you think the future holds for China's semiconductor industry? Share your thoughts in the comments!
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