CHINA IS THE FUTURE OF SEMICONDUCTOR MANUFACTURING

Written by Michael Thervil

When it comes to the manufacturing of semiconductors, South Korea and Taiwan used to be household names. But that is no longer the case as the future of chip manufacturing belongs to China. While Taiwan and South Korea have been consistent in the chip manufacturing sector, China has found the motivation and drive to overtake South Korea in this sector. The root cause of China's motivation and drive lies in China wishing to be self-sufficient in the chip manufacturing industry. With all the adverse risks, market volatility, and turmoil in the world of geopolitics, many believe that this is the best move China can make in order to preserve its self-interest when it comes to manufacture of chips and semiconductors.

In the modern world is which nearly everything that relies on chips and semiconductors; from general technologies, computers, to cars and highly advance computers, robotics, and artificial intelligence, it's crucial for all countries, specifically China to insulate itself at all cost from anything that would have a negative impact on its energy and technological needs. In the recent past decades, South Korean countries like Samsung and SK Hynix and Taiwanese company TSMC were the leading semiconductors manufacturers in the world making up an estimated 90% plus of the chip manufacturing industry. However, China has not only shown that you can manufacture chips and do more with less, but they’ve demonstrated they can do more and less with slightly older semi-conductors and chips. China demonstrated this the most when they disrupted the AI industry twice within a month with its open-source AI Models Deepseek, Tencent, and Manus advanced AI Models and with their ability to make the world first 1 nanometer RISC-V chip made with 2D materials.

According to sources, another reason why South Korea and Taiwan are going to fall behind China in chip manufacturing and applications is because they lack the incentives to retain top talent as other countries are open to paying them more. On top of that, sources have also reported that China has an edge when it comes to the chip manufacturing process. That edge is that they don’t have to bow down to the geo-political pressures and threats of tariffs from America; and one of those threats is the consequences of what will happen to chip manufactures if they don’t manufacture their chips in America. Currently, TSMC have bowed down to American pressure and were forced to manufacture semiconductors and chips in America or face tariffs. But even in deciding to manufacture their chips in America, they still acquired an elevated production cost of 30%, while China is in the position to not only avoid American pressure and tariffs, but subsidized its chip manufactures via government set aside.

It was reported that China currently leads in the production of high performance and low power AI semiconductors at 88.3% and 79.8% in the manufacturing of power conductors while South Korea stood at 84.1% and 67.5% respectively. China also overtook South Korea when it came to next-generation chips with high-performance sensing technology to the tune of 83.9% to South Korea’s 81.3%. Some people may see this as nothing more than a mere few percentage gains, but keep in mind that within the tech sector (and in life) small things like details matter. In the case of Taiwan as far as China is concerned – well Taiwan is a part of China under the “One China Policy”. It should be noted that President Donald Trump, unlike China, did not place tariffs on Taiwanese chips and semiconductors.

Although the American implementation and combination of the 2022 CHIPS Act (U.S. government subsidies for onshore chip manufacturers), sanctions, various barriers, and trade tariffs are seen as nothing more than the weaponization of law which have somewhat seemed to have slowed down China’s chip manufacturing process, it has ultimately backfired as there is no way to completely police the acquisition and application of knowledge in the technological dependent times, we live in. This was seen with China and the release of its AI open-sourced models – which was really an open invitation for the world to contribute to its various AI Models essentially bypassing American led sanctions on them. The question that’s floating around is how long will it be before the world see’s semiconductor and chip overcapacity coming out of China? The guess is sooner rather than later.