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China’s chipmaker industry is growing the fastest in the world but US sanctions on local champions from Huawei Technologies Co. to Hikvision spurred the appetite for home-grown components. Almost all giant-to-small chipmakers have been severely affected by the sanctions implemented by the US.
19 of the world’s 20 fastest-growing chipmaker firms over the past four quarters originated from China, according to data compiled by Bloomberg. That compared with just 8 at the same point last year.
Those China-based suppliers of design software, processors and gear vital to chipmaking are expanding revenue at several times the likes of global leaders Taiwan Semiconductor Manufacturing Co. or ASML Holding NV.
That supercharged growth underscores how tensions between Washington and Beijing are transforming the global $550 billion semiconductor industry — a sector that plays an outsized role in everything from defense to the advent of future technologies like AI and autonomous cars. In 2020, the US began restricting sales of American technology to companies like Semiconductor Manufacturing International Corp. and Hangzhou Hikvision Digital Technology Co., successfully containing their growth — but also fueling a boom in Chinese chip-making and supply. Senior analyst Phelix Lee wrote in an email responding to inquiries from Bloomberg News.
“The biggest underlying trend is China’s quest for self-sufficiency in the supply chain, catalyzed by Covid-related lockdowns, Amid lockdowns, Chinese customers who mostly use imported semiconductors need to source homegrown alternatives to ensure smooth operations.”
Beijing’s ambitions are to accustom itself to a geopolitical rival and more than $430 billion worth of imported chipsets in 2021. Orders for chip-manufacturing equipment from overseas suppliers rose 58% last year as local plants expanded capacity, data provided by industry body Semi show.
That in turn is driving local business. Total sales from Chinese-based chipmaker and designers jumped 18% in 2021 to a record of more than 1 trillion yuan ($150 billion), according to the China Semiconductor Industry Association.
A persistent chip shortage that’s curtailing output at the world’s largest makers of cars and consumer electronics is also working in local chipmakers’ favor, helping Chinese suppliers more easily access the international market — sometimes with premiums tacked onto the best-selling products, such as auto and PC chips.
SMIC and Hua Hong Semiconductor Ltd., the biggest contract chip makers, have kept their Shanghai-based plants operating at almost full capacity even as the worst Covid-19 outbreak since 2020 paralyzes factories and logistics across China. With local authorities’ help, cargo flights from Japan delivered essential materials and gear to chip plants as the city went under lockdown. SMIC recently reported a 67% surge in quarterly sales, outpacing far larger rivals GlobalFoundries Inc. and TSMC.
Shanghai Fullhan Microelectronics Co.’s revenue grew 37% on average because of high demand for surveillance products. The video chip designer has pledged to expand into electric vehicles and AI after winning its “Little Giant” designation. And design tool developer Primarius Technologies Co. doubled sales on average over the past four quarters, saying it’s developed software that can be used in making 3-nanometer chips.
CXMT is China’s only major player designing and making DRAM chips, which like NAND memory, is a sector long dominated by a handful of legacy companies in the United States, South Korea, and Taiwan.
It has one fab in operation and is building two others. It produces DRAM at the 19-nanometer node and is moving into the 17-nanometer node – process nodes behind the industry’s leading edge. Researcher Trendforce wrote that the impact of equipment export restrictions imposed since October might affect expansion plans.
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