China chip design expert warns of losses due to industry overcrowding, says more cautious path to self-sufficiency is needed

China’s chip design industry is facing a sea of losses this year amid excess competition and a rush into the sector due to Beijing’s focus on greater self-sufficiency, a leading Chinese semiconductor industry expert warned.

Wei Shaojun, president of integrated circuit (IC) design at the China Semiconductor Industry Association (CSIA), told a forum in Guangzhou, capital of southern Guangdong province, on Friday that large swathes of the chip industry would end up in the red this year because of the “blind pursuit” of success in an “extremely difficult” environment.

Wei said although China’s IC design sector achieved 8 per cent growth amid challenging conditions – a reference to tougher US trade sanctions – a majority of these enterprises were not in good shape.

Wei said Chinese firms should be careful with efforts to achieve greater self-sufficiency in the semiconductor sector to avoid domestic replacements of foreign products being considered as “low end”. He added that various challenges remain when it comes to achieving breakthroughs in high-end chips.

In updated rules last month, the US Bureau of Industry and Security tightened export restrictions on both semiconductor equipment and advanced artificial intelligence (AI) chips. Wei said the move will make it harder for China to produce the computing power it needs to develop supercomputers and AI systems.