Beijing Unlikely to Achieve Goal of Producing Most Microchips It Needs by 2025: Report

January 8, 2021 Updated: January 8, 2021

The Chinese regime’s semiconductor ambitions will fall short of its policy goal, according to a newly-released analysis by U.S. market research company IC Insights.

The market researcher forecasted that China won’t be able to meet its goals of domestically producing 70 percent of its semiconductor needs by 2025, an objective under Beijing’s industrial policy of “Made in China 2025.”

“IC Insights forecasts that greater than 50% of IC production in China in 2025 will come from foreign companies such as SK Hynix, Samsung, TSMC, and UMC with fabs in China,” according to the analysis.

SK Hynix and Samsung are South Korean chipmakers. TSMC and UMC are semiconductor manufacturers headquartered in Taiwan, with the former being the world’s largest contract chipmaker.

IC Insights reached its conclusion based on 2020 manufacturing data from China. It found that Chinese domestic companies produced $8.3 billion worth of semiconductor chips, or 36.5 percent of all chips (worth $22.7 billion) manufactured inside China. Foreign companies including Samsung, TSMC, and U.S. semiconductor giant Intel—all of them with production facilities in China—produced the rest.

$22.7 billion accounted for 15.9 percent of China’s IC (integrated circuit) market in 2020, which was valued at $143.4 billion. Semiconductors are a subcategory of integrated circuits.

IC Insights predicted that in 2025, Chinese domestic companies will produce as much as $43.2 billion worth of chips, which would account for about 19.4 percent of China’s IC market. The market would grow to be worth around $223 billion by then.

19.4 percent is far lower than China’s 70 percent target under “Made in China 2025.”

For decades, the Chinese regime poured billions of dollars into its domestic semiconductor industry, with the goal of reducing its reliance on foreign companies.

For the first 11 months last year, more than 60,000 Chinese companies registered their businesses as being semiconductor-related, according to the Chinese database platform Tianyancha. The new companies brought the total number of firms in China’s semiconductor industry to roughly 240,000.

However, China continues to be heavily dependent on foreign chips, spending more than $300 billion a year in both 2018 and 2019, according to Chinese state-run media reports.

China spent $219 billion on importing chips for the first eight months of 2020, according to China’s Ministry of Commerce. The yearly total is expected to surpass the $300 billion mark again.

Several major state-supported semiconductor firms have run into financial trouble recently.

Wuhan Hongxin Semiconductor, founded in 2017 in central China’s Hubei Province, is now insolvent, reported U.S.-based online magazine EE Times on Nov. 20 last year, citing comments by the company’s former CEO Chiang Shang-yi. The municipal government of Wuhan has now taken over the company.

In December last year, Chinese media reported that Guangzhou Haixin Semiconductors, which was founded that March, had ceased operations.

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