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State of China’s Semiconductor Manufacturing Industry

China’s position in the global economy cannot be ignored, to put it lightly. Whatever China does affects even the most powerful nations, and industry leaders along with politicians need this information in order to remain competitive.

The results of China’s 2014 initiative to bolster their electronic sector by investing billions of dollars are in. Foreign competitors may breathe a sigh of relief, as it doesn’t seem China has caught up with or overtaken foreign chipmakers in R&D or trade. Still, they’re not backing down and they may yet emerge as a technological colossus. Here’s a breakdown of their progress so far:

Memory

Three multinational companies – Intel, Samsung and SK Hynix – have expanded into China. Other multinational companies have been less open to partnering with the Chinese government based on concerns about security and intellectual property. Policymakers have put the kibosh on some attempts to acquire or partner with foreign companies, leaving China to its own devices.

Indeed, China’s own devices mainly source chips from foreign suppliers, creating a trade gap the government is eager to close. A few semiconductor manufacturing plants have opened thus far, and the government intends to continue investing in order to grow the sector quickly. Since they’re essentially starting from seeds, it will need time in addition to funds.

Fabs

Another area of concentrated investment is fab capacity. Cold War-era export controls have stymied production efforts in China over the past several decades, leading to a gap in technology and expertise in addition to trade. Nevertheless, IC production in China is growing. From 7.8% in 2009 to 12.7% in 2015, projections indicate China will make 20.9% of the world’s chips by 2020.

Their strategy is two-pronged: either reinvent the wheel, or invest in acquisitions. Obviously, acquisitions close the technological gap and grant China access to previously elusive markets. Yet the government isn’t hedging all its bets on forging partnerships. By developing its own technology, China will rely less heavily on imports.

Overall, China boasts a huge consumer population and high demand for technologies, not all of which are at the forefront of innovation. For instance, Chinese companies are willing to invest in 65nm, 55nm, and 40nm chips. This should attract multinational companies and allow the domestic market to grow without the pressure of investing in cutting edge equipment and high levels of technical expertise.

To read more about the companies populating China’s playing field, click here.