In the wake of US trade restrictions on advanced chip-making equipment, China’s integrated circuit (IC) output witnessed a remarkable surge of 40% to 98.1 billion units in the first quarter of the year, per SCMP.
This expansion emanates from the country’s focus on boosting the production of older-generation chips while grappling with constraints imposed by international trade dynamics.
March alone witnessed a staggering 28.4% jump in national IC output, reaching an unprecedented high of 36.2 billion units, as reported by the National Bureau of Statistics (NBS) on Tuesday.
The NBS highlighted the accelerated growth in China’s hi-tech manufacturing sector, reflecting the robust expansion of the semiconductor industry, which is increasingly localized. Haitong Securities echoed this sentiment in a recent report, forecasting a strong rebound in China’s IC production for the year.
The surge in China’s IC output is attributed in part to robust demand from downstream sectors, notably new energy vehicles and smartphones. Government data revealed a 29.2% increase in new-energy-vehicle output in the first quarter, reaching 2.08 million vehicles, while smartphone production expanded by 16.7% during the same period.
In recent years, China has significantly expanded its IC production capacity, with output nearly tripling in the first quarter of 2024 compared to the same period in 2019. However, under the US embargo on advanced chip technologies, Chinese investments have predominantly focused on mature semiconductors, leading to concerns about potential overproduction.
The Centre for Strategic and International Studies highlighted this trend, suggesting that US export controls may inadvertently drive state-backed investments in legacy-chip production, potentially paving the way for Chinese dominance in this sector.
“An unintended consequence of US export controls on advanced chip technology to China may be a wave of state-backed investment leading to overproduction and, potentially, Chinese dominance of global legacy-chip production,” researchers wrote.
Taiwan-based IC research company TrendForce projected that China’s global share of mature-process capacity could reach 39% by 2027, further underscoring the country’s growing influence in the semiconductor industry.
China’s efforts to achieve self-reliance in core technologies have intensified, particularly with initiatives such as the Xinchuang campaign, aimed at developing local alternatives to foreign chips, systems, databases, and software. Beijing aims to bolster the Chinese tech sector, targeting an annual output of 100 billion yuan (US$13.9 billion) by next year.
Despite these ambitious initiatives, China remains heavily reliant on chip imports, with IC imports growing by 12.7% to 121.5 billion units in the first quarter. IC exports also edged up by 3% to 62.4 billion units, according to data released by the General Administration of Customs.
Semiconductors continue to rank as China’s largest import item, surpassing even crude oil in the previous year. This highlights the challenges, amid the country’s ongoing efforts to overcome the impacts of US trade sanctions and build self-sufficiency in semiconductor production.
