China’s chip market set to achieve self-reliance within two years

US sanctions against Chinese telecoms and technology firms have been relentless this year, having profound consequences for the telecoms industry around the world. Perhaps the most significant of these sanctions were those introduced in August, which restricted semiconductor companies from selling chips developed or produced using US software or technology to Huawei without first obtaining a licence. 

 

But while these sanctions were, of course, a significant blow to Huawei, they could actually be a blessing in disguise for the Chinese semiconductor industry, which is now scaling up rapidly to meet domestic demand. This increased demand goes hand in hand with numerous policies being introduced by the Chinese government to nurture growth, including major tax breaks for companies creating 28nm and even 65nm nodes. 

 

As a result, this favourable environment is fostering rapid private and public investment throughout the country; 72 companies received a total of around $3.8 billion in financing from the start of the second quarter to July 23rd this year, with overall investment in the industry in Q2 reaching ten-fold that of the same time last year. Backed by huge chip foundries like Semiconductor Manufacturing International Corporation (SMIC) and Hua Hong Semiconductor Limited, the country’s 28nm chip industry is expected to scale rapidly and achieve domestic self-sufficiency within the next two years. 

 

While 28nm nodes are not at the cutting edge of process technologies in the same sense as 5nm and 7nm, it is a mainstay of industrial applications, being found in everything from cars and planes to TVs and air-conditioners. In addition, China’s homegrown chip tech continues to make breakthroughs – SMIC’s FinFET N+1, which some are calling the “Chinese version” of the 7nm process, was announced earlier this month, bringing with it significant reductions in power consumption (57%), logic area (63%), and System on Chip area (55%), as well as boosting performance by 20%. 

 

Ultimately, SMIC is not positioning N+1 as a direct competitor to traditional 7nm, arguing that it is instead targeted specifically for low-power applications, but the announcement nonetheless sends a clear message to the global semiconductor industry: necessity is the mother of invention. With US sanctions leaving the Chinese chip industry little choice but to quite literally reinvent itself, it will not be long before we see major breakthroughs in technologies to rival those of the West.