China has accelerated the localization of semiconductors and spent more on it in six months than the United States, Korea and Taiwan together

The localization of the semiconductor industry in China is rapidly gaining momentum, becoming one of the country’s most important strategic goals. In the first six months of 2024, China spent a record $25 billion on chip manufacturing equipment, surpassing the combined spending of Taiwan, South Korea and the United States. These investments underscore China’s desire to accelerate its technological independence, especially as US sanctions escalate.

Image source: Laura Ockel / Unsplash

Today, Chinese companies provide the production of microcircuits at almost all stages of the technological chain, with the exception of lithographic equipment, where China still remains dependent on Western technologies. At the same time, Chinese manufacturers are actively developing the DRAM memory segment, focusing their efforts on the release of DDR4 and LPDDR4. Rising memory demand driven by AI presents a unique opportunity for Chinese companies to compete with international leaders already working on next-generation technologies such as DDR5 and HBM. The transition to new standards is becoming a key priority for China in the coming years.

China has made significant progress in the production of advanced silicon carbide (SiC) chips, which have become the basis for new technologies. Over the past two years, more than 100 Chinese companies have entered this sector, and 50 new projects are expected to be completed in 2024, according to the DRAMeXchange resource. Two production lines have already been built for processing 200 mm SiC wafers: the first, created by UNT, is located in Shaoxing, and the second is owned by Silan Microelectronics. The latest project, launched on June 18, attracted an investment of 12 billion yuan and became the country’s first chip production line based on 200mm SiC wafers for power electronics.

Level of localization of semiconductor equipment production in China, share of domestic production and key manufacturers in various technology segments. Image Source: TrendForce

Chinese factories continue to occupy leading positions in the production of chips using mature technical processes. According to the TrendForce report, by 2025 their share in the total capacity of the world’s ten largest manufacturers will reach more than 25%. The main increase in power will come from 28/22 nm nodes, and the overall growth in capacity in the segment will be 6%. However, increased competition in this market may lead to lower prices. In addition, Chinese enterprises are improving specialized technologies, such as HV platforms, where mass production of 28 nm solutions was scheduled for 2024.

The development of advanced packaging technologies such as 2.5D, 3D, WL-CSP, CoWoS and SiP is opening up new horizons for the Chinese chip industry. JCET, Tongfu Microelectronics and HT-Tech are actively investing in these areas. Particular attention is paid to FOPLP technologies, where HT-Tech, ECHINT, MIIC and SiPTORY show significant progress. At the same time, Chinese manufacturers are working to introduce chiplet and 2.5D packaging technologies to meet the growing demand for high-performance AI chips.

The Chinese AI industry is also growing at an impressive pace. According to 2022 data, China accounted for 61.1% of all registered patents in this field. Some of the largest players in the market include Infinigence AI, Alibaba Cloud, Baidu, Vastai Technologies and BIRENTECH. However, the industry faces significant challenges: a lack of computing power, a lag in the development of high-performance graphics processing units (GPUs) and difficulties in creating advanced AI models remain the main obstacles to technological leadership. Successfully overcoming these challenges will not only strengthen China’s position in the global industry, but will also set new guidelines for the development of the global semiconductor industry.