This article is more than 1 year old

China may have to reassess chip strategy in face of US sanctions

Beijing's dreams of producing advanced semiconductors could take much longer than hoped

China may be rethinking its approach to the ongoing semiconductor wars with the US and looking to other ways to boost its chipmaking industry than simply trying to match Washington's costly investments and subsidies.

According to reports, Beijing is seeking alternative strategies to the massive investment that would be required to advance China's semiconductor industry to the level where it could compete with that of the US. This comes as the country faces further impact to its economy following the lifting of its zero-COVID lockdown strategy.

China was previously aiming to step up investments at home in order to combat the US restrictions on advanced chip technology introduced last year, while also taking its case to the World Trade Organization, claiming the US measures threaten global supply chains.

Beijing officials are now said to be considering how to move beyond costly subsidies to semiconductor companies as these may have proven to be counterproductive, according to Bloomberg, which cites anonymous sources familiar with the matter, as they are likely one of the causes behind the current US technology restrictions.

One such move could be to find ways of lowering the cost of semiconductor materials used by chipmakers, it has been suggested. However, without access to Western technologies, China may have to forego plans to produce high-tech chips using the most advanced semiconductor nodes.

"Leading-edge chip fabrication is incredibly difficult," said Andrew Buss, IDC Research Director for European Enterprise Infrastructure. "Even before the latest restrictions, China was struggling to build a competitive semiconductor industry."

Buss pointed to Intel's well-publicized issues with its 10nm process as one example of how even established technology companies can struggle with cutting-edge silicon production.

"Where China is today is that if it wants a cutting-edge semiconductor industry, it needs help from Western companies, but now there are export restrictions on such technology," Buss said.

This is particularly so when it comes to photolithography equipment such as that made by Netherlands-based outfit ASML, which is currently the only provider of Extreme Ultraviolet (EUV) machines used in the production of 5nm and 3nm silicon.

Without access to this, China's semiconductor industry is having to focus on chips made using more mature process nodes, such as those above 14nm, which are still more than adequate for a broad range of applications, including the automotive sector, according to Buss.

"I think we will see China looking more internally, with manufacturers such as SMIC serving the domestic market instead of being a foundry for Western companies," Buss said.

Richard Gordon, practice vice president for semiconductors and electronics at Gartner, agreed on this point, saying that he also sees China using its semiconductor industry to service its own internal consumption more in future.

However, Gordon said that he doesn't believe Beijing will give up on its aspirations for the ability to produce advanced semiconductors, just that it may take longer than previously expected.

"I don't think they will stop throwing money at the problem, but the bigger issue is that it requires expertise and time, and it will take a very long time," he said.

In the meantime, China may well develop its capabilities in existing technologies, such as analog or mixed CMOS, but this will be part of a dual strategy, according to Gordon.

"I expect they will aim to compete in the legacy sector, while investing in developing new technology over the long term," he said. Without access to ASML and its advanced lithographic technology, this may take at least 10-15 years, but China will still try, he added.

The chilling effect of US sanctions is already leading to an undoing of the distributed global supply chain infrastructure that has built over the past few decades, Gordon said, which may lead to a world divided into China-centric and US-Europe-centric networks of supply chains and a greater self-reliance within individual theaters.

"If China becomes a dominant player in legacy semiconductors, would you have them as a second source if the supply could be cut off without warning?" ®

More about


Send us news

Other stories you might like