China's chip exports soar despite US curbs

Sanctions have not hindered development of industry, expert says

Imposition of multiple sanctions by the United States has not been able to halt the rapid growth of China's chip industry, which is continuously expanding its production and technological capabilities, experts said.

China's integrated circuit exports touched 1.03 trillion yuan ($141 billion) in the first 11 months of 2024, a year-on-year increase of 20.3 percent, according to data released recently by the General Administration of Customs.

Integrated circuit design, at the forefront of the chip industry, directly impacts a chip's functionality, performance and cost, according to industry experts.

Integrated circuit exports stood at just 559 billion yuan in 2018 when the US initiated its tech war against China.

The surge in exports comes amid the administration of US President Joe Biden on Dec 23 launching a trade investigation into China's legacy or mature semiconductors, which could lead to higher tariffs or import bans.

China has voiced strong opposition to Washington's unfounded and unilateral move.

Last month, the Bureau of Industry and Security of the US Department of Commerce announced tighter restrictions on semiconductor manufacturing equipment and memory chips meant for China, adding 140 Chinese semiconductor-related companies to its Entity List.

"Amid the US' continued escalation of export controls on chips and related technologies, China's integrated circuit exports have continued to grow, indicating that US sanctions have not hindered the development and expansion of China's chip industry," Xiang Ligang, director-general of the Information Consumption Alliance, a telecom industry association, told China Daily.

"US sanctions over the past several years have allowed China to map out its chip industry chain. While Chinese companies still lag behind some of the world's most advanced levels of manufacturing, design, packaging, and testing, they have made notable progress in each of these areas," he said.

Experts attribute much of this strong growth to robust policy support and clear government guidance, which have fortified the industry's development foundation.

China in May launched the third phase of the China Integrated Circuit Industry Investment Fund, also known as the "Big Fund", with a registered capital of 344 billion yuan. The fund's earlier phases were established in 2014 and 2019, with 138.7 billion yuan and 204.2 billion yuan, respectively.

In 2020, the State Council released policies to support the high-quality development of integrated circuit and software industries.

In June 2014, the Chinese government published an outline to advance the integrated circuit industry.

According to TechInsights, a semiconductor information platform, China's semiconductor industry is projected to experience significant growth, with production capacity anticipated to rise by 40 percent over the next five years.

A chip industrial professional surnamed Zhu said China's localization rate of chip packaging is indeed showing an increasing trend and the yield rate of domestic chips is also gradually improving.

"Generally speaking, mature process technologies can meet the needs of most application scenarios, as many fields do not require advanced processes like 7nm or 5nm. Cost savings and stability are the main considerations," Zhu said.

Mature processes, which use node sizes larger than 28nm, are more suitable for industries like automotive and manufacturing, while advanced processes under 28nm excel in performance but are more expensive and less durable and used in limited areas.

"China has made good progress in mature process chip production, with a higher self-sufficiency rate. However, challenges remain in advanced nodes manufacturing, which is under heavy US restrictions," Liu Liang, a researcher at the Institute of Applied Economics of the Shanghai Academy of Social Sciences, told China Daily.

"The export controls have strongly motivated Chinese firms to pursue innovation independently," he said.

One notable example is Huawei's announcement in November that its newly released Mate 70 series features 100 percent domestically produced chips, including 7nm chips. The Semiconductor Manufacturing International Corporation is also able to mass produce 12nm chips.

Since 2018, the US has steadily intensified efforts to suppress China's chip industry, including sanctions on ZTE in 2018 and restrictions on Huawei since 2019.In 2020, the US introduced measures, including adding multiple Chinese companies to its export control Entity List, to block the flow of 10nm and below chips, as well as related technologies and equipment into China.

"The US restrictions will only backfire on itself and its allies, making it a lose-lose measure," said Xiang of the Information Consumption Alliance.

A report titled "Geopolitical Risk and Decoupling: Evidence from US Export Controls" by the Federal Reserve Bank of New York revised in November stated: "Our estimates suggest that export controls cost the average affected US supplier $857 million in lost market capitalization, with total losses for all affected suppliers totaling $130 billion."

"Global supply chain disruptions, intensified international competition, and faster tech iterations pose new challenges, which have shaped the resilience and vitality of China's domestic chip industry," said Liu, the SASS researcher.

"The rapid development of new technologies like 5G, AI, and internet of things has created vast opportunities and market potential for the chip industry," he said, suggesting increasing investment in R&D and enhancing industry chain collaboration.

Chen Yitian contributed to this story.

shaoxinying@chinadaily.com.cn