The advanced processors of the future domain is where China is at present only manufacturing a third of 0.1 mu m devices. According to a forecast by the Semiconductor Industry Association (SIA) and the Boston Consulting Group (BCG) in 2008. That situation will change dramatically over the next ten years–with America continuing to be head and shoulders above anyone else on ability of making these ultra-miniature chips.
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A Change in Power: The Future of Global Semiconductor Manufacturing
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Global power is shifting from east to west in the arena of semiconductors, with the precision and leading technology this requires. It will be a decade of significant change for China’s semiconductor industry, predict the Semiconductor Industry Association (SIA) and Boston Consulting Group. Amity’s Cao Shumin and Jason Jiang explore these predictions for the layman, focusing both on implications of their findings in terms of global mass-market effect as well as how China can position itself as a destination for high tech and where its electronics industry should be going in future.
The Scene Right Now
In 2022, South Korea and Taiwan were the two largest semiconductor producers in Asia. South Korea produced 31% of sub-10nm semiconductor dies while Taiwan produced 69%. These countries are the leaders in the latest semiconductor technology. Semiconductors taken for granted in contemporary computers and electronic devices come from them.
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On the other hand, China has been striving to reduce its reliance on imported semiconductor technology. Despite large investments and carefully laid strategies, its share of the very top CPUs has remained small. Mid-range technology and legacy silicon are the main areas on which China’s economy for semiconductors concentrates now.
The Effects of the CHIPS Act
The US passing the CHIPS Act is a major element behind changing patterns in the production of semiconductors. With this historic act, the intention is to lift US semiconductor manufacture through large financial incentives and tax privileges. The point of the CHIPS Act is to increase American manufacturing capacity (particularly for high-tech chips with a nanometer or less).
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China has a rough road ahead of it labor, despite all efforts which are made from here on.In 2032, China will merely be able to turn out 2% of the world’s highest-grade processors, say the SIA and BCG This alarming figure brings out the formidable difficulties that China encounters in maturing a semiconductor industry and a corps of technologists of its own.
A Prediction for China’s Semiconductor Industry
However, the future is not all bleak for China. The country’s share in 10 to 22 nm circuits, for instance, is projected to grow from 6% today to 19% Things will also be looking up somewhat as far as historical chips are concerned In a forecast taking into account these trends, China’s production of legacy silicon is seen to increase from 33% today to 37%.
One of the forecast’s most informative aspects is a comparison of growth rates in industrial capacity between 2012–22 and 2022–32. Industry grew by 365% between 2012 and 2022 according to Chinese calculations.Recently, during the past decade, this rate of growth was anticipated to drop off quickly to 86%. Instead price rates of increase should slow insignificantlyThis downturn highlights the problems facing China in extending its capabilities to manufacture sophisticated semiconductors.
Comparative Rates of Growth
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More informative aspects of its forecast are the relative rates of growth in industrial capacity during 2012–2022 and 2022–2032. For the years from 2012 through 2022, China’s industrial capacity was 365% higher. By the end of the following decade, this compound rate of growth is projected to decline hugely to 86%. This slowdown reveals the determination China is having in trying to expand its ability to produce advanced semiconductors.
Changes in Global Market Share
In Image: A Processor fitting inside a Motherboard
Several key shifts in market shares around the world are also projected by the research by 2032:
- United States: 14% of the global semiconductor market compared to 10%
- China: Its over-all share of the semiconductors industry is forecast to fall from 24% to 21%, even as it gets stronger in some categories.
- South Korea: Although its share of advanced chip-making alone is set for a drop from 31% to 9%, the country’s overall slice of the silicon pie is projected to grow modestly, from 17% to 19%.
- Taiwan: Its share of sub-10 nm capacity is projected to fall from 69% to 47%.
These changes, along with all the others mentioned, are among the biggest pieces in a great redistribution of semiconductors manufacturing capacity that’s being powered by economic policy, technological advancement and geopolitics.
The Background of Geopolitics
In addition to the technology and market shares, the semiconductor business is closely tied to geopolitics. The competition for dominance in semiconductors forms a central pillar of tit-for-tat strategic rivalry between Washington and Beijing. A great example of how national laws could influence the world markets in semiconductors is the CHIPS Act.
Another driver behind Chinese ambitions as an independent semiconductors manufacturer are national security considerations. Because it perceives this as a vulnerability, the country wants to reduce dependence on foreign technology. But achieving this goal could require surmounting significant industrial and technical challenges.
The concerted effort to achieve self-sufficiency in semiconductors is something of a common thread running through the global competition for chips dominance. For China, this push is as much focused on strengthening national security as it is on economic prosperity.” The country believes it is a critical vulnerability to depend on foreign semiconductor making knowhow and is focusing and trying to develop and own its own semiconductor capabilities. Data-engineering and technology need to away before it, with China wetting to take up an independence further stable role on global semiconductor business.
China’s Future Direction
For China, moving forward calls for a more diversified approach:
- Investments in research and development: China is promoting semiconductors by increasing the spending on research and development.
- Become Ecosystem Makers: A strong Ecosystem means having talent in semiconductor design, manufacture, and Testing.
- International cooperation: As much it focuses on building its own skills in China, it will also look to build partnerships overseas to boost its technical capabilities.
- Policy Support: Continued government support through monetary programs and policies.
Final Thoughts
According to BCG and the SIA, this represents a game changer for the global landscape of semiconductors manufacturing. And though they will still be far from making the world’s most advanced chips, China will have an impact on other parts of the sector. The CHIPS Act (passed in 2022) should over time provide the U.S. with a large semiconductor manufacturing capability. By 2032, then, just how seriously the U.S. competes in this game will have to be acknowledged.
The future of the semiconductor industry is now being decided by economic policies, geopolitical strategies and technical breakthroughs. At the moment, the CHIPS Act, it would seem, is enabling the United States to roll up its sleeves and recapture the lead in global chipmaking at the same time as China receives nothing but cold shoulder after it tries in this most critical of areas.
“There are still many challenges on the road of developing advanced chip technology in China, but if it can be selective about what technologies it is developing and makes smart investments in key sectors for innovative technology, all the while forming partnerships that benefit its interests globally, China might still have an important role to play in the industry going forth. They are now shaping global power relations in this key domain of the next decade.”