The report from SCMP indicates that the semiconductor export sanctions imposed by the U.S. may have unintended consequences, particularly in the realm of China’s semiconductor industry. Notably, the sanctions exempt legacy chips, which are those utilizing 28nm or older process technology, from trade restrictions due to their widespread use in essential devices and perceived lack of national security threats.
This exemption has spurred a remarkable 40% surge in China’s output of legacy chips during the first quarter of 2024, with a record-breaking 36.2 billion units produced in March alone. This surge underscores China’s concerted efforts to fortify its semiconductor production capabilities, a strategic initiative that began in Q1 2019 with the goal of reducing dependence on foreign chip imports.
The emphasis on mature semiconductors is buoyed by substantial state support and strategic investments, enabling China to rapidly expand its production capacity in this segment. As a result, China is on track to potentially emerge as the global leader in legacy chip production, with projections indicating that its mature-process production capacity could capture 39% of the global market share by 2027, up from 31% in the previous year.
However, despite these advancements, China’s semiconductor industry still faces challenges, particularly in achieving full self-sufficiency. While the country has made significant strides in legacy chip production, its reliance on chip imports remains pronounced, with semiconductor imports growing by 12.7% in Q1 2024. This dependency highlights the ongoing complexities in achieving true self-sufficiency in semiconductor manufacturing.
Moreover, China’s inability to compete in cutting-edge semiconductor nodes poses a significant obstacle to its ambitions. The lack of access to advanced lithography tools required for the fabrication of state-of-the-art microchips impedes China’s ability to rival industry leaders like Intel and TSMC in this critical domain.
In summary, while the U.S. sanctions have inadvertently catalyzed China’s growth in legacy chip production, achieving genuine self-sufficiency in semiconductor manufacturing remains a multifaceted and ongoing endeavor. China’s semiconductor industry must navigate a delicate balance between expanding domestic production capacity and mitigating reliance on international chip imports to realize its long-term strategic objectives.