China is the world’s largest consumer of semiconductors, both for domestic use and export. However, Chinese semiconductor manufacturers are barely able to meet around 30% of the country’s demand. In order to overcome such great dependence on imports, the Chinese government is encouraging multinational corporations in the semiconductor industry to establish in China and making it easier for foreign investors to enter China’s domestic semiconductor production. Moreover, despite the heavy investments aimed at building up a robust domestic semiconductor industry, China remains weak in the design and fabrication of leading-edge memory and processors. Indeed, China-based production in such field just accounts for about 5% of the global market, while US high-end chipmakers retain nearly half of the market.

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After the US government blacklisted some of China’s tech companies in 2019, including the telecommunication giant Huawei and the Alibaba-backed AI startup Megvii, they lost access to the vital US semiconductor market, getting into big troubles and even questioning their own survival. In addition, the pandemic disrupted the supply chain and brought about a sharp rise in the global demand of semiconductors, leading to an unprecedented global shortage.

The importance of developing a strong national semiconductor industry has never been so evident.

Insights on China's semiconductor industry