Semiconductors

The first Chinese transistor was created in 1956 and for the following couple of decades the country’s semiconductor industry concentrated on local development and self-sufficiency through heavy-handed government planning. During the 1990s, China strove to catch up with other nations by working with international firms and collaborating on joint ventures, but ultimately failed to match the world’s leading chip-makers. China shifted tactics in the early 2000s, establishing several China-based semiconductor firms that had clear goals and were able to take advantage of the country’s expanding domestic market. Since then China’s semiconductor industry has become more competitive, although it still lags behind its rivals who have more advanced technology.

China’s semiconductor industry has become a prominent victim of increasingly intense US-China strategic competition. Recently, the US changed its policies on chips and national security. In September, National Security Advisor Jake Sullivan gave a speech on tech and national security, stating that when it comes to technologies “such as advanced logic and memory chips, we must maintain as large of a lead as possible.” In early October, the US announced new restrictions on the export of American chip technology to China, impacting China’s ability to develop chips. The directives prevent Chinese firms that are seeking to develop advanced chips from using non-Chinese factories that rely on U.S. technology to produce their products, and ban US citizens from being involved in development or manufacturing at firms included in the regulations. This presents a major challenge to China’s desire to modernize its chip industry and rival the US.

These new regulations will likely set China back significantly. In anticipation of such measures, China has been accumulating chips and semiconductor manufacturing equipment, but these supplies will diminish and the nation may have to revert to using less advanced chips, setting back its development. Just as it strove for self-sufficiency in the 1960s and ’70s,  China will have to become more independent in order to catch up to other nations in high-end chip design, automation tools, and fabrication equipment.