China just created a $47.5 billion fund to support its own drive to achieve self-sufficiency in semiconductors, seen as an apparent reaction to US export controls over recent years.
The US has repeatedly said China could use advanced chips made in the US to boost its military prowess. The news of the new $47.5 billion fund, announced in a government registry, was viewed by analysts as another step in a long-evolving decline in US-China relations involving chips and trade.
China’s action was to be expected, said Jack Gold, founding analyst of J. Gold Associates, via email to Fierce Electronics. “If you cut off the supply to China, their normal reaction would be, OK, we’ll make our own. The US or Europe or Japan would have the same reaction.”
Leonard Lee, founding analyst at NeXt Curve, agreed. "From the perspective of the Chinese, it is a move of necessity spurred on by US restrictions," he said via email. "China is in largely a defensive position. The ongoing government support of China's domestic semiconductor industry is creating a fork in what is conventionally a global semiconductor roadmap dictated by Western, predominantly US, technology and market leadership."
However, Gold is not convinced that China can even fabricate chips in the next five years with the difficulty in buying advanced chip-making gear, primarily from ASML, based in The Netherlands. Meanwhile, ASML is committed to help Intel, TSMC and others while the government of the Netherlands has restricted ASML sales to China.
“So can China duplicate the equipment necessary for the most advanced nodes?” Gold asked. “No doubt, given their history, China will try to steal as much intellectual property as they can to give them a head start. But it’s still an uphill climb.”
Still, China has talented engineers and government backing, allowing leaders to apply a high priority to chipmaking. “China sees this as critical their future,” Gold said.
For the US and Europe, there are military ramifications in sanctions on chips and chipmaking gear sold to China. “If the US wants to maintain a significant military advantage over China, it has to make sure it has the most advanced processing power and the other guys don’t,” he added.
Lee sees the China fund as different from the CHIPS Act in the US, which he believes is "more focused on process leadership and market share of Taiwanese and South Korean semiconductor firms, particularly TSMC." Inevitably, China's rise in semiconductors will impact growth opportunities of "many if not all US semiconductor firms in China as the Chinese government institutes retaliatory bans on US firms and demand for US products are displaced by domestic China alternatives," Lee warned.
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