Representatives of the Information Technology and Innovation Foundation (ITIF), based in Washington, tried to give a qualitative assessment of the state of affairs in the Chinese semiconductor industry from the point of view of comparison with world leaders. If in the field of chip technology the Chinese industry lags behind the cutting edge by five years, then in the field of chip development the difference is reduced to two years.
Image Source: SMIC
Many sources talk about China’s five-year lag in the field of lithography, and in this sense, the statements of ITIF representatives are not a serious revelation. If Taiwan’s TSMC introduced a 3-nm process technology back in 2022, and South Korea’s Samsung Electronics was nominally ahead of it by several months, then the Chinese company SMIC was only able to begin mass supplies of 7-nm chips for Huawei’s needs last year. It is important to take into account that this lithographic technology was mastered by it under the conditions of US sanctions, which deprived the company of access to advanced foreign equipment. However, experts suggest that SMIC inevitably performs some part of the operations in the manufacture of 7-nm chips on foreign equipment.
Despite investing hundreds of billions of dollars in the development of the semiconductor industry, China still lags behind world leaders in both lithography and chip manufacturing equipment, in many areas. China cannot yet boast of significant progress in the field of chip packaging. Although the country controls 38% of the market for services in this area, it relies on mature technologies, and all advanced solutions are still used by foreign competitors. In the field of mature lithography, Chinese companies occupied 31% of the global market last year, and by 2027 they could occupy 39%. Concerns about China’s rapid expansion in this area have even forced the US authorities to introduce increased duties on Chinese-made chips, which will take effect next year.
At the same time, in the field of chip development, China lags behind world leaders by two years, and the rapid success in this area, according to ITIF representatives, was largely facilitated by high demand in the domestic market. But in general, China’s desire for self-sufficiency in the production of semiconductors is not the most rational way to develop the industry, as ITIF analysts note, since it is too expensive. On the other hand, Chinese companies do not have much choice under US sanctions.
The activity of Chinese companies in the field of patent registration, in which they are twice as high as American ones, is compensated by the low specific share of research and development expenditures. If American companies spent up to 18.8% of their revenue on R&D the year before last, and European and Taiwanese – 15 and 11%, respectively, then in China this share did not exceed 7.6%. Again, it is generally accepted that the state helps Chinese developers well, both through subsidies and tax breaks and other preferences.