China’s Semiconductor Manufacturing International Corp. has reportedly been ramping up its chip production with domestic tools, a move that could potentially counteract U.S. export restrictions.
What Happened: SMIC, China’s leading chip manufacturer, is incorporating homegrown semiconductor-production equipment into its manufacturing line at its new Jingcheng facility in Beijing.
Despite being several generations behind industry leaders like Taiwan Semiconductor Manufacturing Co., SMIC is aggressively reducing its reliance on American tools, reported the Wall Street Journal, citing a person familiar with the matter.
This project marks one of China’s most sophisticated attempts so far to commercially produce chips using domestic equipment. It is a technological self-sufficiency strategy aimed at shielding Beijing from U.S. sanctions.
This initiative is part of Xi Jinping-led China’s broader campaign to eliminate American technology, known as “Delete A” or “Decouple From A.” The Joe Biden administration and some U.S. allies have imposed targeted export curbs, which have hindered China’s ability to produce high-end chips.
However, these measures have also spurred China’s domestic industry to develop more rapidly, resulting in increased spending, experimentation, and even some breakthroughs.
“By blocking everything, you force the sleeping lion to wake up,” said Konrad Kwang-Leei Young, a former TSMC executive and independent SMIC board member until 2021, about the state of China's semiconductor industry.
China, despite the global decline in semiconductor equipment purchases, has significantly increased its spending and represented a third of worldwide sales in 2023.
This year, the country is set to add more new semiconductor-production capacity than the rest of the world combined, all for mature-technology chips, the report noted.
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Why It Matters: In April it was reported that despite the U.S. enacting export controls since October 2022, companies like Intel (NASDAQ:INTC), Broadcom (NASDAQ:AVGO), Qualcomm (NASDAQ:QCOM), and Marvell Technology (NASDAQ:MRVL) have reported higher revenues from China than from the U.S.
These controls focus on AI-related chips but still allow the sale of most other chip types to Chinese entities. Meanwhile, companies like Nvidia (NASDAQ:NVDA) andIntel have created modified AI chips specifically for China to comply with U.S. regulations.
Last month, it was reported that China’s semiconductor spending has topped that of the U.S., with a $142 billion commitment. In the same month, China set up its largest-ever semiconductor investment fund with Big Fund III, collecting 344 billion yuan (about $48 billion) to nurture its semiconductor industry.
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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