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America’s Chip War With China Will Spread

Daniel Nenni

Daniel Nenni

Admin
Staff member

Low-end legacy chips not subject to restrictions but vital to industry have given strength to Chinese manufacturers​


Chinese chip foundry SMIC recently increased its capital investment.


Chinese chip foundry SMIC recently increased its capital investment. Photo: James Park/Bloomberg News

In the continuing chip war between Washington and Beijing, the U.S. has the clear upper hand on the most cutting-edge technology. But on a more mundane front of the battle, China might be gaining an advantage.

Even as U.S. export restrictions have stymied China’s progress in advanced chips, Beijing has been aggressively expanding production of more mature, so-called legacy chips. These aren’t as sexy as the higher end ones—such as artificial intelligence chips from Nvidia—but they are needed for such essentials as automobiles and household appliances. In fact, disrupted supply of these chips caused havoc in the car market during the pandemic.

China spent $41 billion on wafer fabrication equipment in 2024, a 29% year-on-year rise, according to Morgan Stanley. That is roughly 40% of the global total, and compares with $24 billion in 2021.

Part of that was Chinese companies trying to stockpile tools they could still get their hands on before restrictions tightened further. But much also comes from Chinese companies such as Semiconductor Manufacturing International 981 1.59%increase; green up pointing triangle, or SMIC, and Hua Hong Semiconductor 1347 0.47%increase; green up pointing triangle for making legacy chips. SMIC, China’s largest chip foundry, spent $7.5 billion on capital investment in 2023, compared with around $2 billion a year before the pandemic.

The overall strategy has echoes of similar Chinese successes in sectors such as solar panels: massive state support, aggressive pricing and a willingness to play the long game that other players might not be willing to.

They haven’t reached that level of dominance quite yet, though Chinese companies are certainly making inroads: Chinese foundries have increased their global market share in mature nodes from 14% in 2017 to 18% in 2023, according to Bernstein.

Chinese customers, in particular, have helped as they sourced 53% of their mature chip supply from Chinese foundries in 2023, a rise from 48% in 2017.
Intensifying geopolitical tensions will further push Chinese customers to find suppliers at home.

Chinese legacy chips aren’t yet flooding the world, but this is a clear risk, especially to U.S. players—including Texas Instruments TXN 1.30%increase; green up pointing triangle and GlobalFoundries GFS 1.02%increase; green up pointing triangle—competing in these chips. That, in turn, could pose a headache for Washington and its goal of maintaining resilience in the chip supply chain.

 
Legacy chips in embedded systems are "stickier" and less prone to fast design cycle fads. Presumably this is part of China's push to make more of their chips at home, but it requires their system designers to choose those companies. We'll see how they do against established brands.
 
China is the worlds factory for so much the west takes for granted: Costco, Amazon, IKEA, Walmart, Target and almost all electronics go thru China not to mention iEverthing can’t exist without China even with their recent push to move out.

Given China’s aspirations for technology advancement and aspiration for parity to leadership to advance their economy toward parity to superiority the west has really made this what amounts to war pretty much gutting Huawei and blocking every technology company’s access to everything from chips, software and advanced hardware. In the last century would amount to a blockade on oil, steels and other raw materials.

Can’t wait to see the next stage of this conflict escalation.
 
BruceA said:
China is the worlds factory for so much the west takes for granted: Costco, Amazon, IKEA, Walmart, Target and almost all electronics go thru China not to mention iEverthing can’t exist without China even with their recent push to move out.
Click to expand...
There's a real problem brewing. We're moving toward a sci-fi world where less than 5% of the global population could produce all the manufactured goods the entire planet needs, at extremely low prices relative to western wages, thanks to automation, lower wages and brutal global competition (as well as internecine competition within China). First article is eye-opening - don't let the title put you off. But the hard truth is in the second article - the world doesn't need any more manufacturing, so middle income and low income countries are going to need to find other paths to development.

How Elon Musk and Taylor Swift Can Resolve U.S.-China Relations​


Economic development is a fairy tale for poor nations​

Manufacturing won’t pull them out of poverty. Neither will commodities. Their last, improbable hope: Build a middle class around services​


www.tbsnews.net

Economic development is a fairy tale for poor nations

Manufacturing won’t pull them out of poverty. Neither will commodities. Their last, improbable hope: Build a middle class around services
www.tbsnews.net www.tbsnews.net
 
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