The US's restriction of access to advanced chips is expected to help China dominate the market for producing older products.
US Commerce Secretary Gina Raimondo warned in April that about 60% of all legacy chips hitting the market in the next few years will be made by China.
The US and its allies are seeking to limit China's access to current chip models used in emerging fields such as AI. However, in reality, the majority of the output of the semiconductor industry is still old generation chips, which have been perfected and are not too complicated, used in all aspects of life such as household appliances, cars and many other products. other products.
China is predicted to dominate this market in the coming years. Chinese government data also shows that the country's semiconductor output increased by 40% in the first quarter of 2024. Meanwhile, research firm TrendForce predicts that businesses in this country are likely to become a force in the old-generation chip manufacturing segment, with a 33% market share by 2027.
Western officials have repeatedly talked about China's excess production capacity in recent weeks, worrying that the country's subsidies will help businesses increase their competitiveness with foreign competitors.
Beijing's goal is still to produce modern chips on its own to serve the AI and 5G industries. US export restrictions prevent Chinese chipmakers from obtaining the necessary tools and machinery, pushing them back to older processors that they can afford to make themselves.
"They have to start somewhere. Start with mature production processes, then slowly expand the market size," Chim Lee, senior analyst at market analysis company Economist Intelligence Unit, said.
The US regulates older generation chips as chips manufactured on a process "larger than 16-14 nm", corresponding to products developed before 2014. Meanwhile, TSMC is planning to produce chips on 2 nm process for Apple and Nvidia from next year.
Linghao Bao, an analyst at consulting firm Trivium China, said China's growing capacity to make older-generation chips is a result of "efforts to support strategic sectors and secure industrial supply chains." domestic industry" of Beijing. The country has invested heavily in clean energy and electric vehicles to gain a leading position in the world. These products require semiconductor chips, but not necessarily state-of-the-art models like those found in high-end AI and electronics systems.
US restrictions prevent businesses like ASML from selling modern chip manufacturing tools to China, but do not prevent contracts to buy older equipment. Many Chinese companies last year stepped up the purchase of chip manufacturing machines due to concerns that the US might adjust export regulations in the near future.
Companies outside of China may struggle to compete in the older chip market. "Chinese enterprises are still behind the world's leading chip manufacturers in terms of technology, but are more than competitive in price," Lee said.
Despite concerns, the US is considered unlikely to impose an embargo on older generation chips, because this is a step too far for Washington's allies as they are still maintaining cooperation with Beijing.
Statistical data shows that ASML will still deliver an average of one chip manufacturing machine per day to China in 2023. The company's revenue here also increased sharply last year, accounting for about 25%. Japan, a US ally, also maintains equipment exports to China. Tokyo Electron and Canon, two businesses specializing in manufacturing older chip-making equipment, forecast that China could contribute 40% of their revenue this year.