china accelerates local chip production amid US sanctions
Beijing, Thursday, 5 December 2024.
China is ramping up its focus on local semiconductor manufacturing following intensified US sanctions that restrict the export of advanced chips. This strategic pivot aims to mitigate the impact of geopolitical tensions on global supply chains. The move affects major industry players like TSMC, which are now caught in the crossfire of this tech war. Chinese industry associations are actively urging companies to pivot away from US semiconductors, citing security and reliability concerns. In response to the sanctions, China has imposed its own restrictions, including banning exports of critical minerals to the US. This escalation highlights the deepening divide in the tech landscape, with significant implications for the global semiconductor market. As the US and China continue their strategic competition, the semiconductor sector stands at the forefront, with both nations vying for technological and economic supremacy.
Market impact of mineral export restrictions
China’s strategic response to US sanctions includes restricting exports of critical minerals essential for semiconductor production. The country controls 98% of global gallium production, 48% of antimony, and 83% of germanium [2]. These export controls have triggered price increases in the global market [2]. The restrictions, announced on December 3, 2024, are particularly significant as these materials are crucial for both military and civilian applications [2][5].
Chinese industry’s shift from western technology
Chinese industry bodies are actively pushing companies to reduce dependence on US semiconductors. The Internet Society of China has advised companies to prioritize domestic chip manufacturers [2]. This follows China’s previous actions of blacklisting several Intel and AMD products [2]. The China Association of Communication Enterprises has called for a thorough investigation into supply chain vulnerabilities related to Western semiconductors [2][5].
Domestic semiconductor development
Chinese chip companies have made significant progress in localizing their supply chain [5]. On December 3, 2024, newly sanctioned firms Empyrean and Skyverse reported that US restrictions would have minimal impact due to their localized operations [5]. China has exceeded its target of cultivating 10,000 ‘little giant’ firms, reaching 14,600 companies by December 2024 [5], demonstrating the country’s growing technological self-reliance.
Global market implications
The intensifying tech war has prompted major industry shifts. TSMC’s operations face new challenges [4], while ASML, the Dutch semiconductor equipment manufacturer, maintains that US chip restrictions on China won’t affect its 2025 sales forecast [5]. The US Department of Commerce’s Bureau of Industry and Security has implemented three rounds of export controls between 2022 and 2024 [3], significantly impacting global semiconductor trade patterns.