China to spend $150 billion to boost chip manufacturing

The Chinese government is dedicatedly supporting the chip industry.
Mert Erdemir
Central computer processor with Chinese flag.anita2020/iStock

If you're interested in technology and electronics, you've heard about the ongoing global chip shortage. For several years, it's been influencing several industries — from automakers to consumer electronics. The Covid-19 pandemic and Russia's invasion of Ukraine have worsened the situation.

Countries like the U.S. and China are investing considerable sums in producing more semiconductors to overcome this shortage. To close the gap between itself and Europe and the U.S., the Chinese government has been spending over $150 billion by 2030 to jumpstart the production of semiconductors.

Producing 36 percent of the world's electronics, China is the world's largest chip manufacturer, demonstrating the country's superiority in the global electronics supply chain. Additionally, it is the second-largest consumption market, after the U.S., for electronic devices that contain semiconductors. 

Keeping up with the industry's development requires a sophisticated technology that Mainland China's leading chipmaker develops: Semiconductor Manufacturing International Corp (SMIC). But even as the world's fifth-largest chipmaker, SMIC has great difficulty meeting the demand amid the semiconductor shortage.

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What percentage of microchips are made in China?

Despite China's dominance in manufacturing electronics, its collective chip output is not enough to meet the country's requirements. For now, it has only 7.6 percent of total global semiconductor sales, but the number is increasing due to the government's plan to scale its chip production.

China's semiconductor supply chain falls behind in advanced logic foundry production, EDA tools, semiconductor materials, chip design IP, and semiconductor manufacturing equipment. It is presently more limited to older technologies.

Chinese firms made up 16 percent of the global fabless semiconductor market in 2020, putting it third after the U.S. and Taiwan. Chinese chip firms predominantly sell discrete semiconductors, lower-end logic chips, and analog chips. But whatever type of chips are being produced, industry insiders expect the U.S. and Europe to always be dependent on Asia for their materials, primarily due to the global difficulties of providing supplies.

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