DTN 064: Don’t Fear China’s Chipmaking Binge

Should the world fear China’s chipmaking binge?

“Chinese chipmakers are in a tough spot. In October 2022 America’s government restricted the export to China of advanced chips and chipmaking gear made using American intellectual property—which is to say virtually all such devices. This makes it near-impossible for Chinese firms to produce leading-edge microprocessors, the kind whose transistors measure a few nanometres (billionths of a metre) across and which power the latest artificial-intelligence models. But it does not stop them cranking out less advanced chips, with transistor sizes measured in tens of nanometres, of the sort that are needed in everything from televisions and thermostats to refrigerators and cars. As a consequence, semiconductor companies from China increasingly dominate chipmaking’s lagging edge. They account for more than half of all planned expansion in global manufacturing capacity for mature chips. This has alarmed Western policymakers. Still, fears that this threatens the security of the West’s supply chains may be misplaced. Although Chinese chipmakers rival foreign makers of mature semiconductors in manufacturing, they are still outmatched when it comes to design, engineering and product reliability. More surprisingly, Chinese foundries are also at a cost disadvantage.” (Economist)