China will produce one in five of the chips it uses in 2026, says analyst

Well short of planned 70 percent domestic capacity

China’s integrated circuit (IC) production has failed to keep pace with its appetite for silicon, with market research firm IC Insights predicting the nation will produce only one in five ICs it uses in 2026.

That figure is an increase from 2021's one in six, and reflects eight percent compound annual growth rate from 2021 to 2026. But it means China will miss its own targets for locally-made-and-consumed silicon.

“Although China has been the largest consuming country for ICs since 2005, it does not necessarily mean that large increases in IC production within China would immediately follow, or ever follow” said the firm in a bulletin on Wednesday.

While $31.2 billion worth of ICs were made in China in 2021, only $12.3 billion were made by companies headquartered in the Middle Kingdom – approximately $2.7 from integrated device manufacturers and $9.6 billion form pure-play foundries like SMIC.

The other $18.9 billion of chips came from foreign companies with wafer fabs in China, including TSMC, SK Hynix, Samsung, Intel, and UMC.

The $58.2 billion worth of chips predicted to come from China in 2026, makes up 8.1 percent of the total projected worldwide market of $717.7 billion. IC Insights predicts China will consume $274 billion worth of kit, a whopping 38 percent of the worldwide consumption.

In October 2020, Beijing set a goal to be self sufficient in tech by 2035 and homegrow 70 percent of domestic total semiconductor needs by 2025, a number well ahead of IC Insight’s prediction of 21.2 percent by 2026.

Semiconductor self-sufficiency is increasingly important for the Middle Kingdom given current US sanctions, which limit the country’s access to the gear it needs.

The prediction that China will use 38 percent of worldwide chips in 2026 represents a very modest five-year growth in global market share.

In 2021, 36.5 percent of the world’s chips, $186.5 billion out of $510.5, were used by China. ®

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