China's Chip Race Speeds Up

China’s Chip Race Speeds Up

China’s Chip Race Speeds Up as the nation commits unprecedented resources to develop a self-sufficient semiconductor supply chain in the wake of increasingly stringent U.S. chip sanctions. Facing external restrictions on acquiring advanced chips and fabrication equipment, China is fueling rapid domestic innovation across all nodes of the semiconductor ecosystem. Major players like SMIC, YMTC, and Huawei are at the forefront, supported by multibillion-dollar government investments and a strategic pivot toward local chip design, fabrication equipment, and EDA software. This article uncovers China’s progress, compares it with global competitors such as TSMC and Intel, and examines how its accelerated roadmap may restructure global technology markets including AI and consumer electronics.

Key Takeaways

China is rapidly strengthening its semiconductor supply chain in response to U.S. chip export restrictions and geopolitical supply risks.
State support, including the “Big Fund II,” is channeling over $40 billion into local chip infrastructure, tools, and R&D growth.
Companies like SMIC and Huawei are making technological advances despite limitations on ASML’s EUV technology and U.S. design tools.
The global semiconductor landscape is being redefined as China closes gaps in chip manufacturing and fabrication tech.

China’s Chip Race Speeds Up
Key Takeaways
Why Is China Investing Heavily in Semiconductors?
Inside China’s Semiconductor Supply Chain
Technical Comparison: China vs TSMC, Intel, Samsung
Closing Critical Gaps in Chip Design Tools and Equipment
What Are the Global Implications?
Strategic Talent and Education Initiatives
Outlook: Can China Fully Catch Up?
References

Why Is China Investing Heavily in Semiconductors?

The semiconductor industry is the backbone of emerging technologies such as AI, 5G, autonomous vehicles, and quantum computing. For China, gaining technological sovereignty over chip fabrication is not just about economic strength but also national security. As tensions with the United States escalate, China is no longer willing to rely on a global supply chain vulnerable to sanctions.

China’s Ministry of Industry and Information Technology (MIIT) and the state-backed China Integrated Circuit Industry Investment Fund (referred to as the “Big Fund”) have poured billions of dollars into the domestic chip sector. The second phase of the Big Fund, valued at $45 billion, specifically targets advanced lithography, domestic fabrication equipment, wafer processing, and education pipelines needed for long-term self-reliance.

Inside China’s Semiconductor Supply Chain

The China semiconductor supply chain is composed of several interdependent segments: chip design, wafer production (front-end fabrication), packaging and testing (back-end), materials, and EDA (electronic design automation) tools.

Key players include:

SMIC (Semiconductor Manufacturing International Corporation): China’s most advanced foundry, producing at 14nm scale, with a recent breakthrough at 7nm via DUV (deep ultraviolet) lithography.
YMTC (Yangtze Memory Technologies Co.): Specializes in 3D NAND flash memory used in consumer and enterprise storage products.
Huawei: Through its subsidiary HiSilicon, it designs system-on-chips (SoCs) for smartphones and AI processors, although now cut off from cutting-edge fabrication nodes.
Naura and AMEC: Local manufacturers of etching, PVD, and CVD systems attempting to substitute banned U.S. and Japanese tools.
SMEE (Shanghai Micro Electronics Equipment): Leading provider of lithography equipment, currently lagging behind ASML but building DUV systems for 90nm and reportedly 28nm nodes.

Technical Comparison: China vs TSMC, Intel, Samsung

Company	Most Advanced Node (2024)	Lithography Used	Foundry Capacity (Wafers p.m.)	EDA/IP Capabilities
SMIC (China)	7nm (via DUV)	DUV only (No EUV)	~700,000	Depends on open-source and limited proprietary tools
TSMC (Taiwan)	3nm (mass production)	EUV + DUV	~13 million	Broad IP library, Synopsys/Cadence partnerships
Intel (USA)	Intel 4 / Intel 3 (~5nm-class)	EUV	~2.5 million	Full internal EDA tools, x86 IP portfolio
Samsung (South Korea)	3nm (GAA process)	EUV + DUV	~3.5 million	Arm IP licensee, advanced SoC design

China’s 7nm achievement at SMIC, reportedly used in Huawei’s Mate 60 Pro, is noteworthy given its lack of access to EUV lithography. This was accomplished through multi-patterning techniques, highlighting growing domestic expertise despite major limitations.

Closing Critical Gaps in Chip Design Tools and Equipment

U.S. chip sanctions have sharply restricted China’s access to key EDA platforms like Synopsys and Cadence, as well as ASML’s EUV tools necessary for advanced chip etching. In response, Chinese companies are accelerating internal development of substitutes.

Software: Local firms such as Empyrean Technology and X-Epic are building competitive EDA solutions, focusing on RTL design, circuit simulation, and timing verification.

Hardware: Innovation in etching and deposition tools from companies like AMEC and Naura has led to successful deployment in nodes down to 28nm. SMEE is targeting 20nm DUV scanners by 2025, though it’s still behind ASML’s industry-standard EUV systems.

With time and capital, China is building a parallel ecosystem that could eventually eliminate reliance on external core technologies.

What Are the Global Implications?

As China localizes its semiconductor supply chain, the effects will ripple globally. Nations that depend on Chinese electronic components will need to reassess sourcing reliability and technological differentiation.

In sectors like telecommunications, automotive electronics, and AI hardware, China’s upgrade could heighten competition, lower costs, and alter trade balance dynamics. For example, Huawei’s AI accelerators and smartphone chips could reenter emerging markets with greater autonomy from banned U.S. IP. This momentum in chip technology is closely tied to broader efforts as China accelerates ahead in AI development.

This race carries strategic long-term impact. The sooner China can close the technology gap from SMEs like SMEE and design firms to foundries, the greater its leverage in future supply chain negotiations. While advanced EUV systems from ASML remain out of reach, China’s progress in building a scalable 28nm and 14nm stack could make it dominant in mid-range applications.

Strategic Talent and Education Initiatives

China is also investing heavily in education to fuel this semiconductor transformation. Universities have launched specialized chip design curricula, while state labs are incentivizing postgraduates to enter fab R&D programs. The aim is to seed a generation of engineers capable of sustaining domestic innovation.

In partnership with firms like Huawei, top Chinese institutions including Tsinghua University and Peking University are now deploying chip design centers and R&D students into direct internships at chip foundries, EDA firms, and fab tool manufacturers. This talent strategy aligns well with China’s national push to support its AI chip firms obtaining strategic access to foreign technologies.

Outlook: Can China Fully Catch Up?

While China is making substantial progress, catching up to TSMC, Intel, and Samsung remains a formidable challenge. The lack of access to EUV lithography is a significant constraint, and developing domestic EDA stacks from scratch is highly complex.

That said, the current trajectory suggests China can close the gap in essential segments supporting 14nm to 28nm applications, which cover most consumer and industrial use cases today. Strategic autonomy in this range could give China a dominant role in global mid-end chip supply while still working toward higher-end capabilities over the next decade.