Semiconductors are the basic components of electronic products and are used in everything from mobile phones to supercomputer servers. China has long mastered the ability to manufacture finished products from semiconductors produced elsewhere, but at best it is just assembly. China wants to become an original product and idea. , especially in frontier industries such as self-driving cars. To do this, China needs its own semiconductors.
But the challenge is not small. China is currently the world's largest chip market, but only 16% of domestic semiconductors are domestically produced. China imports about 200 billion US dollars of chips each year - more than oil imports. For the development of the local chip industry, the government tax cuts for related companies , And plans to invest up to 32 billion US dollars, hoping to lead the world in chip design and manufacturing.
The earliest semiconductors in China were produced in 1956. At that time, this technology was introduced in the United States. When China reopened its business in the 1970s, officials quickly realized that semiconductors were a key part of the future market economy.
But there were obstacles almost from the very beginning. The Chinese government’s early ideas included the introduction of Japan’s outdated second-hand semiconductor production lines. However, due to bureaucracy, delays in shipments and the lack of users of Chinese-made chips, China’s chip industry was built from zero in the 1990s. Paid at a high price.
Another disadvantage is the lack of capital. For decades, labor-intensive industries have become a way for China to become rich. It has attracted entrepreneurial and official investment. In contrast, semiconductor manufacturing requires billions of upfront investment, possibly 10 years or It will take longer to achieve results. In 2016, Intel’s investment in R&D alone reached 12.7 billion U.S. dollars. Few Chinese companies have such financial resources or experience to make such rational investment. Central planners usually also resist investment that is risky and far-sighted. .
China seems to have recognized this problem. Since 2000, from subsidizing semiconductor R&D and production to equity investment, it is hoped that market forces will play a greater role. However, there are still problems in the distribution of funds. In recent years, the government has been promoting investment in semiconductor factories. Many lack sufficient technology. And those who eventually started may very well lead to excess memory chips and bring financial problems to the domestic industry.
Perhaps the biggest long-term challenge China faces is technology acquisition. Although Beijing wants to build its local chip industry from scratch, the best products still lag behind the United States by one or two generations. A reasonable approach is to purchase technology from or partnership with US companies. This is the way for Japanese and Korean cutting-edge companies to go. However, China cannot do that. China’s acquisition of US semiconductor companies has often been rejected for security reasons. Japan and South Korea have also taken similar scrutiny of Chinese purchases.
Despite all kinds of obstacles, in recent years China has made considerable progress. Some Chinese companies have designed semiconductors for mobile phones and other technology products, and then outsourced production to foreign factories. At the same time, China has invested heavily in related factories, as managers, engineers and Researchers provide key experience. All this does not bring shortcuts, but it may become a component of an industry that China has not built for half a century.