Semiconductors (China Market)

Main article: Economy of China

Global Chip Market

Main Article: Semiconductors (Global Market)

2024

Xiaomi has released the first 3nm processor for smartphones

On October 21, 2024, it became known that Xiaomi developed the first microprocessor in China, which will use 3-nanometer technology. The product is designed for use in mobile devices - smartphones, tablets, etc. Read more here

China spends more on microchip equipment than the U.S., Taiwan and South Korea combined

In 2024, China became the leader in spending on equipment for the production of microchips. For appropriate purposes, the PRC spends more than the United States, Taiwan and South Korea combined. This is stated in materials published in early September 2024.

According to Nikkei, during the first half of 2024, China's investment in equipment for the production of semiconductor products reached $25 billion. This indicates the aggressive efforts of the PRC authorities to localize the release of microcircuits and reduce dependence on foreign suppliers against the background of Western trade restrictions.

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China's investment is due to the need to ensure a stable supply of chips critical to various industries. In 2024-2025, more than ten microchip manufacturing enterprises are planned to be commissioned in the country. The observed surge in investment in the semiconductor industry is not limited to leading Chinese manufacturers such as Semiconductor Manufacturing International Corp. (SMIC) and. Small and Hua Hong medium-sized companies also make a significant contribution.

Large-scale investments have allowed China to maintain its position as the world's largest chip manufacturing equipment market. However, almost all PRC plants are focused on the use of new technical processes, since it is difficult for Chinese companies to purchase the advanced tools necessary to produce microcircuits using the most modern technologies. China's rising spending has weighed heavily on chipmaking tool makers. Companies such as Applied Materials, Lam Research, KLA from the United States, Tokyo Electron from Japan and ASML from the Netherlands record increased revenues from Chinese companies. It is expected that in 2024 China will spend a total of $50 billion on equipment for the production of semiconductor products.^[1]

Chinese chipmakers are 70% equipped with locally made equipment

Chinese semiconductor manufacturing facilities are approximately 70% equipped with locally manufactured equipment. At the same time, there are difficulties with modern lithographic installations, as stated in the materials published on August 7, 2024.

Expanding US export restrictions on China's access to advanced chips and manufacturing technologies have strengthened PRC initiatives to replace foreign instruments, but bottlenecks remain. Amid US sanctions, leading Chinese semiconductor manufacturers have begun shifting their focus from chasing advanced technology to ramping up capacity to produce existing chips for cars and appliances - and significant progress has been made, the South China Morning Post reported.

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The largest Chinese developers and suppliers of semiconductor chip manufacturing equipment are Naura Technology and Advanced Micro-Fabrication Equipment (AMEC). Gerald Yin Zhiyao, chairman and CEO of AMEC, says China's semiconductor supply chain can achieve self-sufficiency despite "quality and reliability gaps." In fact, US restrictions have accelerated the development of the chip industry in China.

It is also said that the most stringent sanctions restrictions apply to lithographic equipment. The Dutch company ASML is the sole supplier of extreme ultraviolet (EUV) lithography systems needed to make advanced chips, as well as the main supplier of less advanced deep ultraviolet (DUV) systems. China continues to purchase obsolete ASML tools that are not subject to US sanctions.^[2]

US imposes ban on the supply of AI memory chips to China

On July 31, 2024, it became known that the US authorities were expanding the list of sanctions measures against China. In particular, a ban is being introduced on the supply of high-performance AI memory chips and equipment for their production to the PRC.

According to reports, we Bloomberg are talking about HBM (High Bandwidth Memory) products - high-bandwidth memory. It is used in powerful accelerators focused on maintaining resource-intensive loads of artificial intelligence. HBM chips are used in accelerators AMD and. Nvidia

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Freepik

The ban applies to solutions of HBM2, HBM3 and HBM3E standards, as well as to specialized tools necessary for the manufacture of these products. Moreover, restrictive measures will affect not only the American corporation Micron Technology, but also the South Korean manufacturers Samsung Electronics and SK Hynix. It is these three companies that dominate the global HBM market as of mid-2024.

The administration Biden is working on a number of restrictions aimed at keeping vital technologies out of the hands of Chinese manufacturers, including a ban on the sale of chip manufacturing equipment, Bloomberg said in a publication.

At the same time, it is noted that the new sanctions restrictions will not have a significant impact on Micron's business. The fact is that this company stopped supplying its HBM products to China after Beijing in 2023 banned local companies from using American-made chips in critical digital infrastructure facilities. The PRC authorities say they are categorically opposed to US efforts to suppress the Chinese semiconductor industry, and accuse Washington of violating international trade rules.^[3]

China spends as much on chip equipment as the rest of the world

According to the results of the first quarter of 2024, China spent approximately $12.52 billion on the purchase of equipment for the production of chips. This corresponds to about half (47%) of global spending in the corresponding segment, which amounted to $26.42 billion. Such data are provided in the report of the industry association SEMI, published on June 5, 2024. Read more here.

China has allocated hundreds of billions of yuan to develop the semiconductor industry

At the end of May 2024 China , he formed a new investment fund to stimulate the development of the semiconductor industry. Hundreds of billions of yuan are planned for these purposes, which is expected to help reduce dependence on Western technology amid increasing sanctions from the outside. USA

As of May 2024

According to Reuters, the authorized capital of the fund is 344 billion yuan, or approximately $48.4 billion at the exchange rate as of May 28, 2024. The creation of the structure is the third phase of support for the semiconductor industry of the PRC. In the first two stages, 138.7 billion yuan and 204 billion yuan were allocated in 2014 and 2019, respectively. Thus, with the formation of a new fund, the amount of funding doubles.

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The Chinese Ministry of Finance has become the largest shareholder in the fund with a 17% stake and a capital of 60 billion yuan (approximately $8.44 billion). China Development Bank Capital is the second largest shareholder with a 10.5% stake. In addition, 17 more organizations are indicated as investors, including five large Chinese banks: Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China and Bank of Communications - each of them owns 6%.

The fund is registered with the Beijing Municipal Administration for Market Regulation. The new investment instrument is part of a comprehensive program of the PRC authorities to create their own semiconductor industry as tensions with the United States escalate. The administration of US President Joe Biden has introduced radical measures to limit China's ability to purchase modern chips and equipment for their production. Moreover, US authorities are urging allies including the Netherlands, Germany, South Korea and Japan to further tighten restrictions on China and close gaps in existing export controls.^[4]

U.S. asks Japan, Netherlands to impose new service restrictions on chip manufacturing equipment in China

At the end of March 2024, the United States is asking allies to impose additional restrictions on the maintenance of chip manufacturing equipment in China, as the administration of US President Biden seeks to further thwart Beijing's desire to create advanced semiconductors.

The technological breakthrough Huawei took American officials by surprise. Biden wants Japan and the Netherlands to further obstruct China by violating their commitments.

Huawei has created its own technology for the production of 5nm chips

At the end of March 2024, it became known that the Chinese company Huawei Technologies, together with a partner, developed its own technology for the production of 5-nm chips. This achievement will help the PRC in the implementation of a comprehensive import substitution program against the background of tough sanctions from the United States. Read more here.

China introduced rules to gradually abandon Intel and AMD processors in the public sector

China introduced new rules, according to which American microprocessors Intel AMD from and will be gradually excluded from use in government PCs and, servers as Beijing it strengthens the campaign to replace foreign technologies with its own products.

Stricter guidance on public procurement is also aimed at abandoning operating system Windows Microsoft software foreign-made databases as well in favor of domestic capabilities. This is happening in parallel with the localization campaign at state-owned enterprises.

2023

Over the year, 10.9 thousand semiconductor companies went bankrupt in China

In mid-June 2024, the China Times reported that the number of semiconductor companies that either filed for bankruptcy or abandoned plans for an IPO had sharply increased in China. This trend has affected not only small startups, but also large participants in the Chinese semiconductor market.

This trend was outlined back in 2020, when the world faced the coronavirus pandemic, and already in 2021-2022, more than 10,000 Chinese chip-related companies closed. The problem reached record highs in 2023, when 10,900 semiconductor-related companies were deregistered almost twice as many as in 2022.

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SMIC

For example, against the background of this wave of changes in 2023, the startup Shanghai Wusheng Semiconductor went bankrupt, which was founded in 2021 and attracted an investment of $2.48 billion. The bankruptcy of this company was reportedly directly related to the financial problems of other semi-nuclear manufacturers such as Wu Sheng Electronics Technology Group and Nanjing Wusheng Semiconductor Technology. According to reports, the current market situation is also of concern to investors: since the beginning of 2024, at least 23 Chinese semiconductor companies have canceled their plans for an IPO.

China has been actively developing the semiconductor industry since 2014 thanks to large government subsidies that ensured the rapid emergence of a number of semiconductor companies, so that 50,000 startups were registered in 2020 alone. However, many high-profile projects ended in failure, and experts predict that in 2024 even more companies will leave the market due to financial problems and increased difficulties in attracting investments.^[5]

China slashes annual chip imports by 10.8% to 479.5 billion chips and increases equipment imports to make them

China Imported a total of 479.5 billion chips in 2023. This is 10.8% less than in 2022, when the volume of imports was estimated at 538 billion units. Such data were published on January 12, 2024 by the PRC customs service.

According to the South China Morning Post, in monetary terms, chip imports to China in 2023 amounted to approximately $349.4 billion, which is 15.4% less than the previous year. For comparison, in 2023, the country spent $337.5 billion on crude oil imports, which is 7.7% less on an annualized basis.

China imported a total of 479.5 billion chips

The decline in imports of chips and semiconductor products generally reflects economic difficulties in China, in particular, weak sales of smartphones and laptops. In addition, the reduction was influenced by the efforts of the authorities to increase local production in order to reduce dependence on foreign products. Due to tough export controls from the United States, China cannot purchase advanced chips such as H100 and A100 GPUs developed by the American company Nvidia. Nevertheless, the country has made significant progress in increasing its own production of individual products, including processors used in cars and household appliances.

[ Album ] China buys (https://www.bloomberg.com/news/articles/2024-01-22/china-buys-near-record-40-billion-of-chip-gear-to-beat-us-curbs?srnd=premium-asia) nearly $40 billion in chip manufacturing equipment to circumvent U.S. restrictions.

Imports of chip manufacturing equipment in China rose 14% in 2023.

According to customs data, imports to China of diodes and other simplest components in 2023 decreased by 23.8% in physical terms. As part of a state-backed push to build a more sustainable domestic supply chain, Chinese players in the semiconductor market have stepped up localization efforts by working more closely with each other. As of the beginning of 2024, there are 44 semiconductor wafer factories in China and 22 more are under construction.^[6]

The first Chinese equipment for the production of 28nm chips has been released

At the end of December 2023, the Chinese company Shanghai Micro Electronics Equipment Group (SMEE), which develops equipment for the production of chips, presented its first lithographic scanner for a 28 nm process technology - the SSA/800-10W system. This achievement represents a breakthrough in the PRC's desire to narrow the technological gap with foreign companies, which is important in the face of tough sanctions from the United States. Read more here.

US forces ASML to cancel shipments of machines to China earlier than the deadline

In December 2023, the company ASML Holding canceled the supply of some of its machines China at the request of the presidential administration USA Joe Biden a few weeks before the ban on the export of expensive equipment for the production of microcircuits came into force.

Import of lithographic equipment to China

The Dutch manufacturer had licenses to supply the top three deep ultraviolet lithography machines to Chinese firms until January, when the new Dutch restrictions took effect. However, American officials asked ASML to immediately stop the planned deliveries of some machines to Chinese customers.

China has mastered 5nm chip production faster than the United States

In early December 2023, it became known that China, contrary to sanctions from the United States, mastered the manufacture of microchips using 5-nm technology. Moreover, in this regard, Chinese companies were able to get ahead of American manufacturers. Read more here.

China may use old equipment to make 5nm chips - former TSMC vice president

In October 2023, former Vice President TSMC Bern Lin said that American sanctions would not be able to stop the progress of Chinese companies in the semiconductor sector. In his opinion China , they can use old equipment purchased before the imposition of sanctions USA for the production of more modern semiconductors. We are talking, for example, about 5-nanometer chips, which will be even more powerful than those installed in new phones. Huawei

And it really is. Dutch ASML [1] sold a huge amount of equipment to China before the imposition of sanctions. In addition, Nikon also collaborated with Chinese firms - the Japanese company supplied machines to the PRC, on which, like# selection-1533.107-1533.157: ~: text=ArF% 20immersion% 20lithography% 20can% 20produces% 20chips% 20at% 205nm, it was claimed that it was possible to create 5-nanometer chips.

US fears competition with China in supply of fundamental chips

and USA their allies should go further than banning access China to advanced chip manufacturing equipment and restricting access to older semiconductor technologies, Silverado Policy Accelerator, a think tank, said in October 2023.

According to them, China is increasing its huge capacity for the production of so-called fundamental chips - less complex components used in everything from cars to phones.

Construction of new chip factories in regions of the world for March 2023

Now, Silverado warns, the Asian superpower is showing signs of price declines in that market compared to Western rivals. This raises fears that Chinese chipmakers could displace foreign competitors, posing a serious threat to US national security.

China is not yet able to produce chips thinner than 90 nm without imported equipment

As of mid-2023 China , there is no domestic equipment for the production of semiconductor products with standards below 90 nm, and it will take years to develop the corresponding plants. This was announced in August 2023 by Li Jinxiang, Deputy Secretary General of the Chinese Association of Manufacturers of Equipment for Production. electronic engineers

We still have a long way to go in lithographic instruments. No chipmaking production line in China is equipped with domestic equipment - most such installations are used exclusively for academic purposes, Jinxiang said.

China lacks domestic equipment to produce semiconductor products with norms less than 90 nm

China was cut off from advanced microchip production equipment (in particular, from ASML systems from the Netherlands) due to restrictions imposed by the US government . The PRC is making great efforts to develop its own lithographic installations, but it is not possible to get rid of dependence on foreign equipment. The main hopes are pinned on the state-owned Shanghai Micro Electronics Equipment Group (SMEE), but the best installation of this company - the SSA600/20 system - as of 2023 allows production at 90 nm standards, which is about an order of magnitude inferior to the capabilities of AMSL equipment and Japanese Nikon.

By the end of 2023, SMEE intends to begin supplying lithographic complexes capable of operating with 28-nm technology: for Beijing, this will be a significant achievement in the pursuit of technological self-sufficiency. At the same time, according to analysts at Albright Stonebridge Group, China will need at least four to five years to create lithographic installations that rely exclusively on components from local suppliers (without the use of foreign parts).^[7]

The US did not expect China to be capable of producing a 7nm processor. They got it wrong

U.S. export controls have not stopped China from developing surprisingly advanced semiconductors for smartphones, adding to American worries about the country's military capabilities amid significant uncertainty.

The chip Kirin in the smartphone Huawei Mate 60 Pro is not as perfect as the 3nm chips that run the most modern new iPhone companies. But Apple export controls aimed to keep Chinese technology capabilities 8 to 10 years behind American ones, and the phone demonstrated that the chip partner Huawei , a Shanghai-based company, could be Semiconductor Manufacturing International Corp. (SMIC) just four years behind.

Why China's sanctions against American Micron turned into a failure

In early August 2023, it became known that China's initiative to increase demand for chips in memory of local production did not bring success. The ban on the supply of products by the American company Micron led to undesirable consequences. Read more here.

China hardens export conditions for metals to make processors

From August 1, 2023, it became known that China it strengthened control over the export of gallium and germany, two central components for the semiconductor sector. The authorities countries warned of upcoming changes back in July 2023. Similar measures were taken in response to how Washington he tried to cut access Beijing to the latest micro technologies. processors More. here

China leads the way in launching new chipmaking factories

American and European officials are increasingly concerned about China's accelerated production of old-generation semiconductors by July 2023 and are discussing new strategies to curb its expansion.

Such chips are still necessary for the global economy, they are the most important components for all types of equipment - from smartphones and electric vehicles to military equipment.

World's largest chip equipment maker ASML supplies China with notoriously defective devices to circumvent US sanctions

On July 4, 2023, it became known that the Dutch company ASML, the largest manufacturer of lithographic equipment for the microelectronic industry, supplies China deliberately "defective" devices to circumvent sanctions. USA More. here

China to drastically cut overseas metal supplies for semiconductors

On July 4, 2023, it became known that China it restricts the export of metals for semiconductors and. electric vehicles This is reportedly a response to pressure that wants to United States contain China's technological progress. Experts warn of future disruptions to global supply chains and rising tensions between. countries More. here

Ban on the sale of products of the American Micron

On May 21, 2023, the State Office of Internet Information of the PRC (CAC), Internet China the central regulatory authority in, announced that the products of the American company Micron Technology had not been tested for compliance with local security requirements. And therefore, operators of the key Chinese information infrastructure are prohibited from purchasing products from this manufacturer. More. here

Reduced supply of chipmaking machines from Taiwan due to US pressure

According to data from the Taipei Ministry of Finance, in April 2023, due to pressure from the outside USA Taiwan , he sent China Hong Kong 151 million chipmakers to and, dollars which is 26% less than a year earlier.

Despite the improvement from the March fall of almost 34%, this is still the 10th month in a row of supply cuts.

A plan for the development of the semiconductor industry without American technologies has been developed

On February 16, 2023, the Chinese Academy of Sciences, the country's highest scientific organization, presented a plan to create its own semiconductor industry. It is assumed that this initiative will bypass US bans on the export of advanced technologies to the PRC.

The document published by the state organization says that the Sino-American technological war exposed the problem that the key technologies of the PRC are "stuck." The authors of the project call the current sets of patents a barrier to the development of Chinese technologies in the field of microchip production, since the design and release of products using existing solutions will inevitably mean the use of protected intellectual property.

China plans to create its own semiconductor industry

In this regard, it is proposed to form its own semiconductor industry, which will include all stages of creating chips - from research to the organization of production. For a long time, annual investments in semiconductor research and development in the U.S. were twice the amount invested elsewhere in the world, the paper said. Therefore, according to the authors of the project, China should increase financial investments in the relevant sector.

The document also talks about the need to create a national network of laboratories for research in the field of semiconductors. To carry out these works, as noted, the most qualified specialists should be involved. In addition, it is proposed to improve the system of protection of intellectual property and stimulate innovative activity of enterprises. Such measures will allow China to solve the problem of dependence on American technologies, will stimulate the development of its own semiconductor industry and will allow the organization of advanced chip production.^[8]

Chinese Academy of Sciences proposed a plan to create its own semiconductor industry in the country

The Academy sciences China proposed a plan to the country to create in its own, semiconductor industries which will allow not to pay attention to the bans on USA the export of technologies to the Celestial Empire. This became known on February 21, 2023. In October 2022, he introduced Washington a package of sanctions restricting the export of semiconductors and equipment for the production of chips to dozens of Chinese companies. According to experts, these are the largest export control measures over the past 10 years.

The Chinese authors of the above plan define existing patent portfolios as an obstacle to Chinese chip technologies, so they want to build their own semiconductor industry, which includes all stages of semiconductor development and production. So China will not depend on the United States and other countries with production capacity in this area.

The authors believe that the project needs to attract the brightest minds of the country, so the state should strongly support researchers working in this area. Of course, the education system also needs to be adapted to the needs of the industry and develop appropriate university courses in order to "nurture" competent specialists.

Semiconductors are a sore topic for China. The country has repeatedly tried to finance research and development in this area, but there are simply no opportunities for silicon production in China for February 2023. Attempts to launch the necessary plants were often disrupted even before the start of construction, as a result of which China became the world's largest importer of semiconductors without its production capacity.

The next package of sanctions imposed by America in October was the last straw for the Chinese economy. After all, the country will suffer huge losses, and dozens of industries may simply cease to exist without immediate investment in the semiconductor industry^[9].

Chinese companies began to buy used equipment for the release of chips amid upcoming sanctions

China There is an increase in demand for used equipment for the production of microchips, which became known in early February 2023. This situation is explained by the fears of PRC enterprises about the tightening of sanctions by the allies. USA

It is said that the American authorities convinced Japan and the Netherlands to strengthen control over the export of production equipment to China. What kind of installations are we talking about, there is no information. But such uncertainty has already caused alarm among Chinese factories that need foreign solutions to expand or modernize their production.

China sees growing demand for second-hand microchip equipment

If Japan joins Washington's push to restrict PRC access to advanced equipment, it could deal another heavy blow to the Chinese chip market, which is trying to diversify supply chains under US sanctions. One of the industry participants, who wished to remain anonymous, said that Japan could restrict the supply of modern equipment to China, including systems for lithography in deep ultraviolet light (DUV). In particular, a shortage of Nikon and Tokyo Electron installations is predicted.

According to Johnny Liao, manager of a used equipment sales company based in Shenzhen, the number of customer calls considering buying used systems for releasing chips has increased significantly. According to the South China Morning Post, this is due to a sharp rise in prices for certain Japanese equipment amid speculation about new restrictions. An unnamed sales representative from, Tokyo who helps his company sell Japanese equipment to Chinese customers, said that any tightening of export controls would lead to increased costs, creating difficulties and uncertainties in trade relations with the PRC.^[10]

Japan, Netherlands join China semiconductor blockade at US demand

At the end of January 2023, the United States, Japan and the Netherlands agreed to impose restrictions on the sale of chip equipment to China. This step is aimed at countering China's attempts to gain access to advanced technologies for military purposes, the blockade participants are confident that their actions will deal a heavy blow to China.

These measures are designed to limit China's ability to increase domestic chip production and were adopted after the Biden administration announced similar restrictions in October 2022. The fear is that easier access to advanced semiconductors will allow China to strengthen its military and AI capabilities.

At the end of January 2023, restrictions on the sale of chip equipment to China agreed to introduce the United States, Japan and the Netherlands

The goal is to ban the sale to China of immersion lithography machines, which are the most modern in this area. Immersion lithography technology is not as advanced as EUV lithography scanner technology, which was banned for deliveries to China by the Dutch authorities back in 2020. However, immersion lithography is considered the next technological step after the basic deep ultraviolet radiation (DUV) lithography, which was previously widely used in China by the manufacturer of lithographic scanners ASML. DUV will lose the ability to supply immersion lithography equipment to China, as well as similar restrictions will apply to Japanese suppliers such as Nikon and Tokyo Electron.

The U.S.-Japan-Holland agreement is expected to most likely put the countries' tech industries on a more level playing field, preventing companies from Japan and the Netherlands from hastily claiming market share in China abandoned by U.S. companies. Companies in the United States said the opportunity would put them at a disadvantage.

By limiting China's ability to produce advanced chips, leaving the country without semiconductors and equipment to assemble them Washington , it hopes to slow down the technological development of the People's Republic of China. At the same time, US President Joe Biden signed a law on measures to support semiconductor manufacturers in the United States in the amount of $52.7 billion in order to strengthen its position in competition with China. In a review supply chains in 2022, the Biden administration recognized a significant dependence on states the products of Taiwanese TSMC, which produces over 90% of the most modern microchips in the world.^[11]

2022

China spent $290.8 billion on semiconductor projects in 2 years

During 2021-2022, China invested more than 2.1 trillion yuan (approximately $289.78 billion at the exchange rate as of June 28, 2023) in various projects related to semiconductor products. Such data are given in the report of the research firm JW Consulting, released at the end of June 2023.

The authors of the document analyzed 742 different projects in 25 Chinese provinces and regions. They cover areas such as semiconductor materials and equipment, displays, storage devices, microchips of various types, packaging and testing technologies, etc.

China invests in projects related to semiconductor products, more than 2.1 trillion yuan

The study showed that the number of semiconductor projects in China is growing from year to year. So, in 2021 there were 142 new projects and 187 ongoing projects. In 2022, these figures rose to 160 and 352, respectively. The most significant growth was recorded in the provinces of Anhui and Guangdong. In the first, during 2021-2022, 304 new projects were launched with a total investment of approximately 425.6 billion yuan ($58.73 billion), in the second - 66 projects with a total investment of 342.3 billion yuan ($47.23 billion).

During 2021-2022, 176 projects on semiconductor materials and 56 projects on equipment were implemented, which in total amounted to more than 30% of the total number (742 projects). For comparison, in 2016-2020 there were 40 projects on semiconductor materials and 7 projects on equipment - 15.6% of the total.

In terms of investments, the largest segment is display-related projects: they accounted for 717.9 billion yuan ($99.06 billion) in 2021-2022. In second place are initiatives related to production: 423.6 billion yuan ($58.45 billion). This is followed by platform projects - 286.7 billion yuan ($39.56 billion).^[12]

In 2 years, 10 thousand chip development companies closed in China

In the PRC in the period from 2021 to 2022. curtailed their activities or approximately 10 thousand companies and organizations that specialized in the development of microchips were liquidated. This was reported in early May 2023 by Chinese state media.

Against the background of the implementation of the national program "Made in China 2025," aimed at the development of the local semiconductor industry, the number of chip developers began to grow rapidly in China. However, the rapid expansion of the sector was replaced by a sharp decline: IT firms began to close one after another, unable to withstand competition with each other and with large players.

About 10 thousand companies and organizations that specialized in microchip development have curtailed their activities or were liquidated

Other reasons for the massive closure of Chinese chip developers are also called. This is a global decline in the global semiconductor market amid the current macroeconomic situation and crisis. In addition, tough American sanctions had a negative impact on the development of the industry in China.

On the other hand, the escalating trade war between the United States and China, which began in 2018, further pushed the Chinese government to finance high-tech companies. In particular, the mentioned initiative "Made in China 2025" provides for a number of measures to support local IT companies: tax cuts, incentives for the acquisition of foreign developers, support for research and development work by large manufacturers, as well as direct government funding.

According to China Renaissance Securities, the number of Chinese chip developers increased from 736 to 1780 between 2015 and 2017. At the same time, according to DigiTimes estimates, during 2020-2021. in China, 70 thousand chip companies were registered. However, by the beginning of 2023, their number had decreased significantly. Many Chinese developers who mass-produced chips went broke because they could not offer customers anything special.^[13]

China chip imports fall for first time since 2004

On January 13, 2023, the General Customs Administration of China released data according to which the volume of supplies of integrated circuits to the Celestial Empire in 2022 decreased. The fall was recorded for the first time in almost two decades: the last time the decline was noted in 2004. Read more here.

A woman pretended to be pregnant to smuggle hundreds of Intel processors worth $115,000 to China

On December 2, 2022, it became known that customs authorities China detained a woman at the border who was trying to illegally smuggle the products of companies and into the country Intel. Apple To do this, the smuggler pretended to be pregnant, using a dummy belly. More. here

US won't let China take Taiwan chipmakers "untouched"

The United States will not allow China to capture Taiwanese chipmakers "untouched." This became known on December 2, 2022. Read more here.

US bans its citizens from participating in the development of Chinese chips

On October 12, 2022, restrictions on the US Department of Commerce came into force, according to which Americans and residents (green card holders) are prohibited from participating in the development of Chinese chips.

According to The Wall Street Journal (WSJ), there are at least 43 such people in 16 large Chinese chipmakers in senior leadership positions. Most of them are natives of the Celestial Empire who were educated in the United States and returned to their homeland.

US bans its citizens from participating in the development of Chinese chips

On October 17, 2022, Bloomberg cited the names of eight significant Chinese companies, where American citizens and residents are among the founders, chairmen of boards of directors, executive directors or vice presidents. Это Montage Technology, AMEC, 3Peak, StarPower Semiconductor, SG Micro, ACM Research, Halo Microelectronics, Maxscend. WSJ also calls GigaDevice Semiconductor and KingSemi, the latter produces components for the Taiwanese semiconductor giant TSMC.

The restrictions mark Washington's most significant action against Beijing on technology exports in decades, sharpening the trade battle between the two countries.

After export controls, Apple reportedly suspended plans to use memory chips from Chinese company Yangtze Memory Technologies in its products. The Nikkei newspaper reported that Apple planned to use chips in iPhones sold in China.

The announcement of new sanctions instantly affected exchange trading: shares of Chinese semiconductor manufacturers fell sharply - for example, Shanghai Fudan Microelectronics fell 20% in a day. Chinese authorities have formally protested, accusing the US of discriminatory trade policies and of trying to impose a technological blockade on the country.^[14]

The United States banned the use of chips made outside the country. American experts leave China

In October 2022, the US authorities issued a decree that prohibits the use of chips made outside the country. The restriction applies not only to companies from the United States, but also to any others using American technology.

Experts explain that the ban on US President Biden, in fact, forced American specialists working in the production of chips in China to choose between dismissal and loss of citizenship. As a result, American executives and engineers working in China in the production of semiconductors resigned en masse from Friday to Saturday, paralyzing the entire industry.

US bans its companies from supplying chip manufacturing equipment to China

On October 7, 2022, the administration of US President Biden announced another set of export control measures: the new rules, in particular, provide for the expansion of sanctions against the Chinese semiconductor industry.

The rules, some of which take effect immediately, are based on restrictions that were previously set for companies and KLA Lam Research : Applied Materials they are ordered to stop supplying equipment for the production of advanced microchips to fully owned To China plants.

The administration of US President Joe Biden has unveiled a set of export control measures: the rules provide for the expansion of sanctions on the Chinese semiconductor industry

The new measures, among other things, affect the HPC segment. So, from now on, the supply of a wide range of components for Chinese supercomputers is prohibited. We are talking about computing systems with a performance of more than 100 petaflops, which cover an area of ​ ​ up to 600 square meters. Market participants believe that this restriction will hit a number of commercial data centers in China hard.

In accordance with the approved rules, it is prohibited to supply certain semiconductor chips to the PRC, manufactured anywhere in the world using equipment of American origin.

In addition, the "black list" of Chinese companies has been expanded - enterprises that cannot be inspected by US representatives. Among others, it includes Yangtze Memory Technologies (YMTC), a leading Chinese manufacturer of flash memory chips.

In general, as noted, the measures taken could lead to the most serious changes in US policy regarding the supply of technology to China since the 1990s. The restrictions will certainly slow down the development of the Chinese semiconductor industry. Moreover, market participants say that these rules, in fact, will set the PRC back years in terms of the development of the semiconductor industry.^[15]

Thousands of semiconductor companies shut down in China

On September 15, 2022, it became known that a record number of Chinese semiconductor-related companies ceased to exist in the first eight months of 2022, which indicates a decline in the country's self-sufficiency of chips. This is evidenced by the data of the National Enterprise Registration Service of the PRC.

Between January and August 2022, 3,470 companies were deregistered, including entities using the Chinese word "chip" in their registered names, brands or operations, according to statistics from database platform Qichacha. This number exceeded 3,420 such firms, which closed in 2021, and 1,397 firms that ceased to exist in 2020.

Record number of Chinese semiconductor-related companies go defunct

{{quote 'The semiconductor industry is a capital intensive sector,' Zheng Lei, an adjunct professor at Shenzhen Financial Institute at China University of Hong Kong, said in a note. He noted that some new-registered chip firms may find it difficult to stay in business amid fierce competition and the current harsh market situation. }} The wave of closures comes after the public and private sectors China have been heavily invested in Beijing's goal of self-sufficiency in semiconductors since 2020. In 2020, 23,100 new chip-related enterprises appeared in the country, and 47,400 in 2021.

While Chinese leaders continue to push efforts to overcome strategic "obstacles" in the country, in particular, integrated circuits, the recent surge in the closure of chip firms shows that a weakening domestic economy, low consumer activity caused by store closures due to COVID-19 and measures to combat the pandemic, as well as growing tensions between Beijing and Washington are putting pressure on the semiconductor sector.^[16]

US bans high-tech companies from building new plants in China for 10 years

On September 7, 2022, it became known that the Biden administration announced that American technology companies receiving federal funding would be prohibited from building "advanced technology" facilities in China over the next 10 years. Read more here.

Anti-corruption investigations of top industry officials

By August 2022, management China was increasingly frustrated at the years-long failure to develop semiconductors capable of replacing American schemes, a disgrace capped by a flurry of anti-corruption investigations into top industry officials and the rescue of Tsinghua Unigroup for 9 billion. dollars

According to the sources, the leadership is outraged that tens of billions of dollars poured into the industry over the past decade did not lead to such breakthroughs that were achieved in previous scientific initiatives at the national level.

The investigations sent shockwaves through a semiconductor industry long accustomed to top-tier support.

Bloomberg: Sanctions helped China rapidly develop semiconductor industry

On June 20, 2022, a study was published according to which the Chinese semiconductor industry is developing faster than any other in the world, after the United States imposed sanctions on local manufacturers.

According to Bloomberg, 19 of the 20 fastest growing participants in the semiconductor market are Chinese, while in 2021 there were eight. Chinese developers of chip design software, manufacturers of processors and equipment necessary for the production of chips are increasing revenues faster than the world leaders TSMC and ASML Holding, agency observers point out.

Bloomberg: Sanctions helped China rapidly develop semiconductor industry

After the US imposed restrictions in 2020 on the sale of American technology to companies such as Semiconductor Manufacturing International and Hikvision Digital Technology in an attempt to limit their growth, they said, it led to a boom in Chinese manufacturing and chip supplies.

The most important driver is China's desire for independence in the supply chain, which was stimulated by the blockages associated with, says Morningstar Covid-19 analyst Felix Li. - Amid the restrictions, Chinese customers who predominantly consumed imported semiconductors are forced to look for domestic alternatives to ensure stable operations.

According to Bloomberg, Beijing's goal is to economically free itself from geopolitical competitors, and in particular from imported semiconductors. Orders for chip-making equipment from overseas suppliers rose 58% in 2021 as local factories expand their capacity, according to Semi. These factors contribute to the development of local business. According to the China Semiconductor Industry Association, total sales of Chinese chipmakers and designers in 2021 grew by 18% to more than 1 trillion yuan ($150 billion).^[17]

Organization of local production of plate equipment and EDA

According to March 2022, China invests more than $100 billion in the construction of factories and organizes local production of equipment for working with plates and EDA ^[18]]. According to Reuters, in 2023, the Chinese authorities can allocate up to $143^[19] for the development of the national semiconductor industry ^[20], including for subsidizing purchases of production equipment by Chinese companies.

According to to data the Ministry of Industry and, information technology 5G they are used in 200 mines, per 1,000 factories, in 180 power supply networks, 89 ports and 600 hospitals throughout China. China has made impressive strides in quantum computer science by building machines competing with. supercomputers USA Read more here.

2021: Chip production up 33.3% to 359.4 billion units

On January 17, 2022, the Chinese government published data according to which the growth rate of chip production in China doubled. The rise is new evidence that Beijing's efforts to maintain China's integration into global supply chains are paying off.

China produced 359.4 billion chips in 2021, up 33.3% from 2022, according to data released by China's National Bureau of Statistics (NBS). That marked a significant acceleration from 2020, when chip production in China rose 16.2% to 261.3 billion units.

While the official data does not contain a breakdown by technology node - China is unable to produce the most advanced chips - or by company, it emphasized the country's efforts to increase production amid a prolonged chip shortage and Beijing's push for self-sufficiency in semiconductors.

Chinese chip market up 33% in 2021

A report released in January 2022 by the American Semiconductor Industry Association (SIA) projected that China's semiconductor industry could account for 17.4% of global sales by 2024, up from 9% in 2020 if its current momentum continues.

That would make China the world's 3rd-largest chip supplier - a measure other than output - second only to the United States and South Korea.

China's efforts to develop its semiconductor sector with government subsidies, procurement preferences and other preferential policies have sparked an investment boom in the industry.

China announced 28 additional integrated circuit manufacturing projects totaling $26 billion in 2021, many of them related to advanced technologies such as analog chips and MEMS.

According to data published by the General Customs Administration, chip imports to China in 2021 amounted to $432 billion, which is 23.6% more than in 2020. China's spending on semiconductor imports equals the country's spending on grain and crude oil combined.

By volume, China imported 432.5 billion chips in 2021, which still exceeds the country's production.

Chinese companies, however, are still small players on the global stage. According to a report by the American research company IC Insights, in 2021, the total income of 17 semiconductor firms exceeded $10 billion, but none of them were Chinese.^[21]

2020

China begins to strengthen its position in the production of semiconductors

The U.S. and China are worried about Taiwan and South Korea's lead in semiconductor manufacturing. The U.S. accounted for just 12% of semiconductor capacity in 2020, while Taiwan and South Korea combined provided 43%, according to a report released in September 2020 by the Boston Consulting Group (BCG) and the Semiconductor Industry Association (SIA).

Calculation data for 2020 dated September 2020

More chips are imported into China than oil

At the end of August 2020, it became known that the main source global industry growth in the first half of the year was China as it still imports more chips than oil. According to customs, in the first seven months of 2020, China purchased chips worth $184 billion from American chipmakers, including Micron and Qualcomm, that 12% more than in the same period of 2019.

Thus, everything goes to the fact that the import of semiconductors into China for the third year in a row will exceed $300 billion, but the second largest economy in the world, it still depends on US production. Vice-chairman Wei Shaojun Chinese Semiconductor Industry Association believes full secession China from the US threatens global economy and not yet possible, despite significant Chinese successes industries.

More chips are imported into China than oil

Nevertheless, China has been developing its own for many years in a row technology companies such as Huawei Technologies, Tsinghua Unigroup and China Electronics, investing in chip, AI and software. State-backed Tsinghua Unigroup builds $22 memory chip plant billion in the central city of Wuhan, while HiSilicon is already has developed processors for most of its high-performance mobile devices.

After Washington bans Huawei from using tools automation of design of electronic devices and devices from Cadence Design Systems and Synopsys, Chinese entered the game software developers. So, the state-owned company China Electronics ready to deploy design software 7nm processors and develops automation tools design of electronic devices to create 5 nm technology.^[22]

2019: Thousands of Taiwanese chip specialists move to China for higher salaries

In early December 2019, it became known that China was luring thousands of Taiwanese semiconductor specialists, offering them higher salaries. This is reported by the ZDNet edition with reference to local media.

According to the Taiwanese edition of Business Weekly, about 3 thousand chip experts left Taiwan and began working in mainland China.

It became known that China lures thousands of Taiwanese semiconductor specialists, offering them higher salaries

In total, there are about 40 thousand specialists in research and development of semiconductor technologies in Taiwan, which means that about 8% of professionals in this field could leave the island.

Most technology companies in mainland China typically offer double or even triple higher salaries compared to Taiwanese rivals, the publication said.

One of the Taiwanese engineers, in a conversation with the Nikkei Asian Review, said that his new boss in China offered to pay for his daughter's training at a Chinese private school.

Taiwan is considered one of the main manufacturing bases in the chip market. It has always been one of the main sources of chipset imports for Chinese tech companies. Since some companies from the Middle Kingdom are prohibited from buying American products, Japanese, South Korean and European companies also play an important role in the development of technology in China.

The outflow of Taiwanese semiconductor specialists was the result 2025 the Made in China 2025 initiative, which has been promoting the PRC government for many years. As part of this ambitious plan, China is seeking leadership in 10 key technology industries, including semiconductor, as well as reducing reliance on foreign developments. Against this background, a trade war began between China and the United States, which continues by December 2019.^[23]

Notes