A tech research group said China lags three or four generations behind what is considered cutting-edge in the semiconductor business,  despite its large investments. China still needs to obtain access to the software and equipment needed to manufacture high-end circuits.

In 2018, President Xi Jinping said that China’s dependence on core technology is the “biggest hidden trouble”. Indeed, the semiconductor industry has been identified as a vital strategic battleground in which China relies on the US. At its core, Xi’s message emphasizes the hidden dangers that come with essential technologies not being mastered locally.

He said that China must accelerate the development of its own domestic plans, establish safe and controllable information technology systems, and push forward and make breakthroughs in the research and development of high-performance computing, mobile communication, quantum communication, core chips and operating systems.

That is precisely what China has been doing, especially since the outbreak of the pandemic. The country has also stated plans to invest US$ 1.4 trillion in advanced technology, including semiconductors, between 2020 and 2025.

To top it off, the country’s 14th Five Year Plan, released in March, identified semiconductors and artificial intelligence as two pillars for future technological progress in the next five years. The goal is to become self-sufficient in semiconductors and a lucrative exporter of this high-tech component.

China’s National Bureau of Statistics stated this week that semiconductor output climbed by 33% last year, doubling the rate of the previous year. 

Could China catch up with the latest semiconductor tech?

China isn’t far behind in the semiconductor race in general. After all, it is the world’s second-largest semiconductor consumer, trailing only the U.S. However, mainland China lags well behind the U.S. in terms of advanced microprocessor production. China’s primary position in the semiconductor industry has long been an assembler and packager.

In a recent interview with CNBC, Mario Morales, group vice president for enabling technologies and semiconductors at International Data Corporation (IDC), discusses the semiconductor chip competition between the U.S. and China. 

“I still believe that [China is] probably three or four generations behind what is considered the leading edge,” Morales said. 

The leading technologies, according to Morales, are 16-nanometer or 14-nanometer and below. 

He added:

“The majority of that comes, primarily, from Taiwan and Korea, and to a certain degree in the U.S., with Intel.” 

In a nutshell, he said that China has fallen behind in this race.

To put things in perspective, chips are often measured in nanometers, which is the width of the gates in a chip’s transistors; smaller gates enable quicker operations while using less energy. SMIC, a Chinese company, claims it can create 14 nm chips, even though its core business is now generating 28 nm chips and other mature technology.

In comparison, Taiwan Semiconductor Manufacturing Company, the world’s largest chipmaker, plans to begin commercial production of 3 nm chips this year, leaving SMIC five to six years behind—assuming it can master the techniques required.

Shenzhen’s Huawei is another mainland China semiconductor flagship, aside from SMIC in contract manufacturing. Even though both businesses are global players, neither has ever cracked the top 15 in semiconductor sales. Despite being a world-class firm, Huawei’s ability to access markets has been limited since the Trump administration implemented restrictions against it.

China will not attain core technology independence anytime soon. Still, it is trying its best to catch up with the U.S. While significant investment is a must, other criteria such as a strong pool of talent and a reasonable amount of experimentation are essential.

Along with all of this, more significant players like Intel, Samsung, TSMC, and others are also making advances.

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