Chip war: China is 5 years behind global leading-edge production, report says

Leading global players remain years ahead of top Chinese companies in advanced chip manufacturing, according to US think tank ITIF

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Employees at a semiconductor company in Beijing. Photo: Xinhua

Published: 5:00pm, 20 Aug 2024Updated: 4:04pm, 25 Sep 2024

China lags global leaders by five years in commercial manufacturing of advanced logic chips and continues to fall behind in semiconductor manufacturing equipment, although Chinese companies have made progress in other areas, according to a new report.

In leading-edge logic chip manufacturing, top players, such as Taiwan Semiconductor Manufacturing Company (TSMC), are about five years more technologically advanced than Semiconductor Manufacturing International Corporation (SMIC), mainland China’s largest foundry, said a report published on Monday by the Information Technology and Innovation Foundation (ITIF), a Washington-based science and technology policy think tank.

TSMC, the world’s largest contract chip maker, introduced in 2022 its 3-nanometre process, used in making some of the world’s most sophisticated chips. SMIC, which was reportedly testing its next-generation 5-nm process, last year began producing chips at the 7-nm node for Huawei Technologies’ flagship Mate 60 smartphone series, in defiance of US sanctions aimed at capping Chinese firms at 14-nm.

“China is investing hundreds of billions of dollars to become a leader in semiconductors, so it is making impressive strides, but its progress so far has been limited to certain aspects of chip development and production,” said Stephen Ezell, ITIF’s vice-president of global innovation, who wrote the report.

Chinese firms are even weaker in the production of semiconductor-manufacturing equipment, as well as semiconductor assembly, testing and packaging (ATP). Despite innovative efforts, Chinese companies stand “several years more behind global leaders”, the ITIF said.

The future looks brighter in the design of logic chips, where Chinese companies have come closer to global leaders, falling by only two years behind, according to the ITIF. Strong local demand for the design of logic chips used in mobile devices or artificial intelligence applications has fuelled faster innovation, the report said.

The growth of China’s semiconductor industry, particularly in older-generation chips, has been driven largely by massive subsidies, according to the report, as President Xi Jinping calls on all levels of the government to support the nation’s chip self-reliance drive.