How China is reshaping the global chip industry

China’s push for self-reliance in semiconductors has gained momentum after the U.S. imposed stricter export controls on advanced chips four years ago. These chips, crucial for artificial intelligence, data centers, and defense systems, were targeted to slow Beijing’s technological rise. Despite trailing at the forefront of innovation, China’s mid-tier semiconductor capabilities are now fueling significant economic growth globally.

The Biden administration’s actions aimed to curb Beijing’s ability to develop cutting-edge technologies that could enhance its military and financial power, further reducing the gap between the world’s top two economies. This prompted China to accelerate its domestic chip production goals, originally outlined in the Made in China 2025 initiative. Since then, the government has invested heavily in building a self-sufficient semiconductor industry.

Beijing has offered substantial support to local firms, including subsidies and tax incentives, to rival U.S. tech giants like NVIDIA and Taiwan’s TSMC. SMIC, a key player in China’s self-reliance strategy, reported $9.3 billion in revenue last year, while HuaHong operated at 106% capacity due to high demand, as revealed in its 2025 fourth-quarter earnings report.

Progress in Legacy Chips

China has made strides in producing legacy semiconductors—essential for vehicles, industrial tools, and consumer gadgets—capturing roughly 30% of the global market, according to the Rhodium Group. These chips, though not the fastest, are now manufactured in large quantities, raising concerns among international competitors. John Lee of East-West Futures warned that China’s expansion could lower global chip prices and pressure foreign manufacturers, especially in sectors like silicon carbide wafers.

“Chinese production expansion will drive down [chip] prices globally and put pressure on non-Chinese vendors,” predicted John Lee, a Berlin-based research analyst. He added that silicon carbide wafers, a vital component for high-power chips, are already seeing such effects.

Challenges with Advanced Technologies

While China has achieved progress in mid-tier chip manufacturing, experts note that its capabilities in ultra-advanced semiconductors remain limited. Ryu Yongwook, an assistant professor at the National University of Singapore, argues that Beijing’s current level of self-sufficiency is far from complete. “Beijing wants to achieve chip self-sufficiency, but the current level is nowhere near it,” he said, highlighting gaps in research, design, and innovation compared to the U.S. and Taiwan.

“There is only so much that you can do without access to the U.S.’s most advanced chipset,” explained Tim Rühlig of the European Union Institute for Security Studies. He described China’s ambitions as facing a “brick wall” of technological barriers and sanctions, estimating it may take a decade to fully catch up.

China’s recent Five-Year Plan reflects a strategic shift, downplaying earlier goals of semiconductor dominance. The 141-page document emphasizes AI more than 50 times and outlines a broader framework that positions advanced chips as part of a larger computing ecosystem. The focus now leans toward practical, industry-oriented AI that requires less computational power, which domestic chips can efficiently support.

This approach has driven rapid adoption of Chinese technology in the Global South, where cost-effective solutions are increasingly favored over Western alternatives. Market intelligence firm Trendforce recently noted the growing influence of China’s semiconductor industry, underscoring its role in reshaping global supply chains and innovation dynamics.