China remains the world’s largest importers of chips, and will spend some $300 billion to import semiconductors this year — the vital component for chips’ functionality in storing data and programs on computers and other devices — but the Trump administration’s blacklisting a who’s who of China’s tech companies has put into doubt the country’s continued access to the most advanced chips.
And now Bloomberg reports China is paving the way for an ambitious new program to establish a domestic semiconductor industry which new government policies are rapidly prioritizing in order to counter US sanctions and ultimately sever dependency on American tech in the near and long term. The report underscores the Beijing will confer “the same kind of priority on the effort it accorded to building its atomic capability.”
This as major Chinese firms long central in headlines related to the US-China showdown like Huawei, will lose access to chips based on new American regulations. In Huawei’s case, Taiwan Semiconductor Manufacturing Co. will be prohibited from doing business with the Shenzhen-based telecommunications and electronics company.
“Beijing is preparing broad support for so-called third-generation semiconductors for the five years through 2025, said the people, asking not to be identified discussing government deliberations,” Bloomberg reports. “A suite of measures to bolster research, education and financing for the industry has been added to a draft of the country’s 14th five-year plan, which will be presented to the country’s top leaders in October, the people said.”
To drive forward these efforts President Xi Jinping earlier promised $1.4 trillion through 2025 to ensure rapid advance of domestic produced cutting edge technologies, central to which are semiconductors, which is vital to everything from wireless networks, to developing AI, to cellular phones.
“This is a sector about to see explosive growth,” Xin Capital Co.’s Alan Zhou, said last week at an industry event. He predicted the transition will likely see huge investment in Chinese semiconductor development, which could create a “world-class Chinese chip giant.”
However there’s still a technology gap in this area which Chinese developers have struggled to close over and ahead of more developed rivals in this area like the US, Japan, and Europe.
Beijing has had a benchmark in place since the start of the trade war to see at least 40% of China’s semiconductor needs met by local manufacturers by middle of next decade. But the question remains whether it can catch up to the cutting edge global leaders and original innovators in the industry responsible for breakthroughs centered in the West.