The US is about to lose the world semiconductor war. Sanctions make China a leader in the chip segment

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The Chinese authorities launched a large-scale campaign to develop the domestic semiconductor industry. In just a few years, Chinese chip designers and manufacturers have become leaders, taking 19 out of 20 places in the ranking of the fastest growing companies in this segment. American experts believe that for the United States this means a quick loss in the struggle for dominance in the global chip market.

US on the verge of collapse

US sanctions against the Chinese semiconductor industry, introduced in the spring of 2020, eventually led to its rapid growth, writes Bloomberg. According to the results of 2021, China ranked 19th in the ranking of the fastest growing semiconductor companies in the world, consisting of 20 places.

This in itself can be considered an outstanding achievement. But what makes it even more significant is the fact that in 2020, China ranked only eight places in the same ranking.

China’s success in the development and production of semiconductors was also noted by American experts. Former Google CEO Eric Schmidt (Eric Schmidt) scientist Graham Ellison (Graham Ellison) in an interview with The Wall Street Journal said that what is happening in the Chinese semiconductor industry poses a serious threat to the United States. “America is on the verge of losing the competition for chips,” experts said. If Beijing develops long-term advantages in the semiconductor supply chain, it will lead to breakthroughs in fundamental technologies that the US cannot match.”

It all started with Trump

Sanctions against China’s semiconductor industry imposed by former US President Donald Trump (Donald Trump). It all started in May 2020, when the Taiwanese company TSMC, at the request of the US authorities, lost the opportunity to produce processors for HiSilicon. This is a subsidiary of the Chinese tech giant Huawei, which developed, among other things, the mobile processors of the Kirin series.

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Even the former head of the American corporation Google believed in the strength of China as a global tech giant

In the same 2020, Semiconductor Manufacturing International Corp. fell under US sanctions. (SMIC) is China’s largest contract chip manufacturer. She stopped receiving the technologies necessary for her work from the New World.

Chinese companies, ranked 19 out of 20, supply software, chips, and equipment used in the production of microcircuits. according to Bloomberg, their shipment volumes are several times higher than those of their main competitors, including TSMC and the Dutch ASML Holding NV.

“Little Giants” will save a big country

Chinese chip manufacturers in 2022 show rapid growth. Thus, the shares of Cambricon Technologies Corp. Since the beginning of the year, they have more than doubled in price and, according to analysts, they have not yet exhausted their potential.

Chinese authorities intend to invest billions of dollars in small IT companies working in the field of semiconductors. They are called “little giants” in China, and the state has high hopes for them.

At the beginning of 2022, there were over 4,750 “little giants” in China. Receiving this status provides the company with numerous benefits, including tax breaks and reduced interest rates on loans.

The program of support by the Chinese authorities for small companies and start-ups in the field of semiconductors is bearing fruit. This can be seen in Yangtze Memory Technologies Co., founded in July 2016.

The company is primarily engaged in the production of flash memory chips (NAND). It is one of those companies that is showing rapid growth, and so fast that the largest IT companies around the world have begun to pay attention to it. The most striking example is Apple, which is considering Yangtze Memory Technologies Co. as a supplier of memory modules for future iPhone models.

The goal is complete self-sufficiency

According to Bloomberg, China is not only aiming for world dominance in the semiconductor segment. It is also important for the country to achieve maximum independence from foreign suppliers.

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Chinese authorities want Chinese electronics companies to use domestic components first. This is being done, among other things, in order to prevent a repeat of the situation in 2020, when due to the COVID-19 coronavirus pandemic and the numerous lockdowns caused by it, Chinese vendors were cut off from the supply of imported chips.

To achieve this goal, the PRC, in particular, does not hesitate to purchase equipment for the production of chips from abroad. Deliveries of such hardware in 2021 grew by 58% year-on-year.

All these efforts eventually stimulate the local chip business. Total sales of Chinese chip makers jumped 18% in 2021 to a record high of more than 1 trillion yuan ($150 billion), according to the China Semiconductor Industry Association.

The persistent shortage of chips, which is cutting production at the world’s largest auto and consumer electronics makers, is also working to the advantage of Chinese chip makers. It makes it much easier for them to enter the international market and, in some cases, allows them to sell their products at a good margin.

Sanctions are completely useless

One example of the efforts of the Chinese authorities is the factories of SMIC and Hua Hong Semiconductor Ltd. for the production of microcircuits. Despite the lockdowns, they have operated at full capacity throughout the pandemic, although numerous outbreaks of COVID-19 in the country have repeatedly paralyzed factories and logistics across China.

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SMIC is blacklisted by US authorities. This means that numerous sanctions have also been imposed against it. At the end of 2021, against this background, as CNews reported, four top managers who were responsible for the activities of the company’s main divisions left its management at once.

However, this did not prevent the company from continuing to demonstrate high performance. So, according to the results of the first quarter of 2022, SMIC reported a 67% increase in quarterly sales year-on-year. Moreover, in this regard, it outstripped both the American GlobalFoundries and TSMC, which is considered the largest contract manufacturer of semiconductors in the world.




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