China’s plans to become independent in terms of chip production as quickly as possible are still far from its lofty goals. China actually wants to cover 70 percent of its domestic needs from its own production by 2025. So far it is only around 16 percent.
The Chinese government has big plans. As early as 2015, it was announced that they wanted to accumulate enough capacities and, above all, technologies within 10 years in order to be able to meet 70 percent of the country’s demand for chips of various types from their own production. However, this project is likely to fail terribly.
According to studies by IC Insights, which the Japanese business service Nikkei Asia quotes, China was only able to produce around 16 percent of the chips required in the country itself in 2020. This is a surprisingly low figure given that the government has exerted massive pressure and made huge investments for years to promote the development and manufacture of processors and other chips in China.
By 2020, 40 percent of all chips should come from Chinese companies
When the so-called “Made in China 2025” program was launched for this purpose, less than 10 percent of the chips used in China also came from the country. By 2020 the proportion should have increased to 40 percent, but obviously, nothing came of it. However, the pure percentages cannot be taken as the only yardstick.
With state funds, China has massively expanded the production of flash memory chips and is also expanding the capacities and capabilities of its own largest chip manufacturer, SMIC. However, the efforts made so far are not sufficient to meet the enormous increase in demand. The required quantities have simply exploded since the start of the Made in China 2025 program so that capacities are nowhere near being covered by domestic production.
If you take a closer look at the statistics of the market observers from IC Insights, it quickly becomes clear that China’s share of chips that are actually built by Chinese companies is even lower. A large part of the chips built-in in China come from the country but are only built there by foreign companies. These include manufacturers such as TSMC from Taiwan and Samsung or SK Hynix from South Korea. If you take their share out of the equation, only a meager 6 percent of the chips made in China come from Chinese companies.
The biggest obstacle to the targeted growth are embargoes and other measures by the USA, which have ensured that purely Chinese companies no longer have access to the urgently needed manufacturing facilities and technologies that make the production of state-of-the-art chips possible in the first place. These systems mostly come from foreign companies that dominate the market but are no longer allowed to deliver to Chinese customers without incurring severe penalties themselves.
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