‘De-Americanize’: How China Is Remaking Its Chip Business

Mr. Xi has been outspoken about what he sees as an effort by Western countries to enforce an “all-around containment” of China. During an important legislative meeting in March, the Chinese president interrupted remarks by a delegate from a Chinese crane manufacturer. The exchange was widely reported by state media: “The chips inside your cranes, are they locally sourced?” Mr. Xi asked. Yes, the delegate said.

So far, less than 1 percent of all semiconductors in China are at the industry’s top end that are subject to U.S. controls, according to estimates from Yole Group, a market research firm. The rest are less advanced, or “mature,” semiconductors, found in everyday consumer electronics and cars, and are “the vast majority of the business,” said Jean-Christophe Eloy, the chief executive of Yole Group. Those chips, largely untouched by the Biden administration’s October controls, are now seeing a surge of investment, he added.

China’s two largest chip manufacturers, the state-backed Semiconductor Manufacturing International Corporation, or SMIC, and Hua Hong Semiconductor have each announced billions of dollars this year to expand production into mature chips, according to public announcements.

Yet over the long term, China’s lack of access to world-class tools needed to make chips could stymie its progress in many advanced industries like artificial intelligence and aerospace, according to Handel Jones, the chief executive of International Business Strategies, a consulting firm.

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