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Sci - Tech City | Solving China's "Chip" Problem Requires a Focus on the Global Semiconductor Industry Ecosystem
Release Date:2025/5/24 Browses:75
Semiconductors (also known as chips) are indispensable "converters" for the digital transformation of all sectors, including new - generation frontier technologies such as artificial intelligence, quantum computing, and the Internet of Things, as well as agriculture, manufacturing, healthcare, transportation, and national defense. They are of vital significance to a country's competitiveness in the future digital revolution and national security. For this reason, the United States has imposed technological blockades on China through various means such as export controls, investment reviews, and entity lists, restricting China's access to advanced chips. Other developed countries and emerging economies have also successively introduced various policies in an attempt to maximize their own interests in the global semiconductor industry division of labor. The development of China's semiconductor industry is facing challenges across the entire industrial chain, from underlying design technologies to manufacturing raw materials, equipment, processes, talent, and product markets. How to achieve self - reliance in the semiconductor field is a strategic issue that urgently needs to be addressed.


This article focuses on analyzing the competitive position and development environment of China's semiconductor industry from the perspective of the global semiconductor industry ecosystem, providing decision - making references for China to more scientifically promote the development of the semiconductor industry.

I. Main Characteristics of the Global Semiconductor Industry Ecosystem

Semiconductor is an industry with highly intensive capital and highly complex technology. So far, no country has a complete semiconductor industrial chain. According to a research report by Accenture, in the global semiconductor industry division system, at least 25 countries' enterprises are directly involved in the division of labor, and another 23 countries' enterprises are indirectly involved. A highly complex industrial ecosystem has been formed globally. The main characteristics are as follows:

1. From the Perspective of Industry Production and Market Structure, the Global Semiconductor Industry Ecosystem is Highly "Americanized"

The manufacturing capacity of the U.S. semiconductor industry has always maintained a high level globally. In 2020, it accounted for 43.5% of the global total, close to the sum of the production capacities of major semiconductor production regions such as Singapore, China Taiwan, Japan, and Europe (mainly the Netherlands, the UK, and Germany) (accounting for 46.5%), and was 8.1 times that of China in the same period (see Figure 1). From the perspective of the global semiconductor market structure, the "Americanized" feature is even more remarkable. U.S. companies almost dominate the major regional markets around the world, accounting for about 50% of the markets in China and Europe, and the lowest proportion in the Japanese market, which still reaches 40% (see Figure 2). According to an assessment by the Center for Security and Emerging Technology (CSET) at Georgetown University of 73 sub - sectors of the semiconductor industry, the United States has a leading edge in 50 of them. Among them, in the most core field of the industry - the design automation software field (EDA), companies headquartered in the United States account for as high as 97% of the market share, with an absolute monopoly advantage; in the core technology (core IP) field, the market share also reaches 52%. In contrast, European companies account for about 43%, and China only 2%. U.S. companies almost dominate the global semiconductor industrial chain.


Figure 1: Proportion of Semiconductor Production Capacity in Major Countries and Regions in the World in 2020 (%)


Country/RegionProportion
United States43.5
Singapore18.7
China Taiwan9.6
Europe9.5
Japan8.7
China5.4
Others4.8
Source: SIA Factbook, 2021.


Figure 2: Semiconductor Market Size and Proportion of U.S. Companies in Major Countries and Regions (2020)


Country/RegionMarket Total Size (10 亿美元)Market Size of U.S. Companies (10 亿美元)Proportion of U.S. Companies
United States151.5--
China119.550.1% of Total50.1%
Japan95.441.1% of Total41.1%
Europe75.939.5% of Total39.5%
Others-49.7% of Total49.7%
Source: Same as Figure 1.


2. From the Perspective of the Semiconductor Industry Supply Chain Division of Labor, "Monopolistic Division of Labor" is a Particularly Prominent Feature of the Global Semiconductor Industry Ecosystem

The semiconductor industry has high technical thresholds in almost all links of the supply chain, from chip design, manufacturing to packaging and testing, and from manufacturing materials, processes to equipment. After more than 60 years of development, even the most leading United States has not established a complete industrial chain, but has gradually formed many "monopolistic" nodes in the global supply chain division system.


As shown in Figure 3, the United States holds more than 90% or even 100% market share in key fields such as chip design automation software (EDA), design of high - end chips such as CPU and GPU, and ultra - large dose ion implanters and process monitoring equipment and software required for chip manufacturing. Japan has more than 90% market share in photoresist, electronic etching, and chip cleaning process equipment. The Netherlands has a 100% monopoly in lithography machines and other key fields. In addition, there are some regional monopolies. For example, the manufacturing of logic chips below 10 nanometers is completely controlled by three companies: Intel of the United States, TSMC of China Taiwan, and Samsung of South Korea. The United States and the United Kingdom jointly control 95% of the global semiconductor industry's core IP. Japan and the United States jointly control 93% of the global production of photomask materials. China has certain advantages in relatively low - value - added and low - technical - complexity links such as semiconductor packaging and assembly, especially in integrated assembly, which accounts for 97.6% of the global market share.


Figure 3: "Monopolies" in Key Fields of the Global Semiconductor Ecosystem


FieldMajor Players and Market ShareChina's Market Share
Design Software (EDA)U.S. (96%), China (1%)1%
Core IPU.S. (52%) + UK (43%)2%
Design of Advanced Processors (CPU, GPU, FPGA)U.S. (100%)5%
DRAMSouth Korea (73%)-
Logic Chip IDMU.S. (39%) + Japan (31%)2%
Manufacturing of Logic Chips < 45nmChina Taiwan (41%) + U.S. (18%)14%
Packaging and TestingChina Taiwan (52%) + U.S. (15%)21%
PhotoresistJapan (90%)0
PhotomaskJapan (53%) + U.S. (40%)0
WaferJapan (56%) + China Taiwan (16%)4%
Ion ImplanterU.S. (83.2 - 100%)<2%
Electronic EtchingJapan (91.3%)0
Process Monitoring EquipmentU.S. (90.2%)0
Lithography MachineNetherlands (100%)0
Source: Compiled by the author based on relevant research reports from CSET, VLSI, and BCG. The numbers in parentheses are global market shares.

3. "Semiconductor" Has Become the "Strategic Core" of Policy Support in Major Developed Economies, and the Influence of Geopolitics in the Global Semiconductor Industry Ecosystem Has Become More Prominent

Recently, the Innovation and Competition Act proposed by the two houses of the United States lists "semiconductor" as one of the "must - win" frontier technologies and plans to establish a $50 billion semiconductor fund and a $2 billion defense semiconductor fund to support the development of the U.S. semiconductor industry in the next five years. Among them, $39 billion is pre - allocated, $2 billion is used to support the production of domestic traditional chips, and $10.5 billion is used for the construction of the National Semiconductor Technology Center, advanced packaging manufacturing, and other R&D projects. In May this year, South Korea proposed the K - Semiconductor Industrial Belt construction national strategy, planning to build the world's largest semiconductor supply chain including chip raw materials, manufacturing equipment, and manufacturing plants by 2030. In the "Digital Compass Initiative" promulgated by the EU in March this year, it is proposed that by 2030, the EU's chip production share of the global total should be increased from the current less than 10% to 20%. In 2020, China Taiwan proposed to invest $1.3 billion annually to attract foreign companies to establish semiconductor R&D projects in Taiwan, with the government subsidizing 50% of all R&D costs. Japan proposed in its semiconductor and digital strategy that it will form an alliance with the United States to 重塑 (reshape) its leading position in the global semiconductor industry. Countries such as Singapore and Israel have also proposed to bear about 30% of the costs for introduced semiconductor manufacturing enterprises through incentive policies such as land development, equipment procurement, and financial subsidies.


Semiconductor has become a strategic core of technological innovation and a government - led strategic industry in various countries. The global competition around semiconductors has gone beyond economic competition. Countries with monopoly advantages have continuously initiated various forms of trade and technical disputes (such as between China and the United States, South Korea and Japan). In order to stabilize their dominant positions, leading countries and regions have also actively promoted the so - called strategic alliances (such as between the United States and Japan, the United States and the EU, Japan and China Taiwan), resulting in increasingly complex geopolitical relations in the global semiconductor industry ecosystem.

II. Policy Recommendations for Accelerating the Healthy Development of China's Semiconductor Industry

Semiconductor is actually a "big technology" industry with multiple attributes such as traditional industrial technology, digital technology, platform technology, and defense technology. Its development cannot be separated from the global technology and industry division system. Therefore, it is necessary to be placed in the global semiconductor technology and industry development ecosystem and promote the development of China's semiconductor industry with a more systematic and strategic policy approach. The specific recommendations are as follows:

1. From the Perspective of Longer - Term National Strategic Security, Formulate an Overall Strategy to Guide the Long - Term Development of Semiconductor Technology and Industry

In response to the technological blockades of the United States and other developed countries in the semiconductor industry, China has adopted more vigorous support policies and proposed the goal of achieving 70% localization by 2025. However, semiconductor technological innovation is a systematic project that requires long - term large - scale capital investment. For example, the United States spent as much as $44 billion on R&D in 2020, accounting for 18.6% of its sales revenue. In the past 20 years, the proportion of R&D expenditure in its industry revenue has exceeded 10%, and the average annual growth rate has long remained at about 7.0%. In addition, according to a study by the Boston Consulting Group (BCG), if calculated based on China's 24% share of the global semiconductor market demand, achieving semiconductor "independence" requires upfront investment of approximately $175 - 250 billion, plus annual operating costs of $10 - 30 billion, without considering other uncertain risk factors such as geopolitics and technological updates in the technological innovation process. This is a very difficult challenge for any country. China should fully recognize the 特殊性 (particularity) of the semiconductor industry, focus on longer - term national security, and formulate a long - term and comprehensive semiconductor development strategy.


This strategy should include the following three aspects: First, conduct a comprehensive and in - depth assessment of the development of China's semiconductor technology and industry from the global semiconductor technology system and industry ecosystem, especially to identify the risk points of geopolitical relations to China's semiconductor supply chain, so as to determine the "mandatory options" and "priority options" for technological research; Second, attach great importance to the "strategic characteristics" of semiconductors in national economic security and national defense security, place basic research, research and development of core key technologies, and commercial development under the overall framework of national security for more systematic strategic planning, clarify the capital investment, talent training, and competition coordination mechanisms for sustainable development in different fields, and strive to build a healthy industry ecosystem conducive to the independent innovation and sustainable development of China's semiconductor technology; Third, closely integrate semiconductor technological innovation with the national digital transformation strategy for future economic and social development, and strengthen the coordination between semiconductor technological innovation and major national development strategies.

2. Seize the Strategic Window Period When the Global Semiconductor Technology "Moore's Law Cycle" is Approaching the Limit, and Accelerate China's Substantive Breakthroughs in the Global Semiconductor Supply Chain with a New National System

From the trend of global semiconductor technological progress, the manufacturing technology of 28nm silicon chips is a critical point of Moore's Law. After that, the technology progress cycle will be prolonged and the cost will increase significantly. For example, the cost of developing and manufacturing advanced logic chips from 10nm to 7nm will increase by $100 million, and from 7nm to 5nm, the cost will double. Due to the increase in cost and technical complexity, the current technological update has reached a limit. The focus of competition in the next generation of semiconductor technology will shift to new semiconductor materials (such as gallium or nitrogen - based materials) and quantum computing, etc. The progress of these technologies depends more on breakthroughs in basic disciplines such as physics, chemistry, and mathematics, and the R&D cycle is relatively longer. The global semiconductor technology progress cycle has entered a slowdown stage.


This is a very important strategic window period for China's technological catch - up. China should fully summarize the innovation experience in fields such as "Two Bombs, One Satellite" and aerospace, and accelerate the improvement of the new national system, concentrating greater strength to achieve substantive breakthroughs in some key fields of China's semiconductor technology. However, it is necessary to rationally recognize the complexity of semiconductor technology and the actual gap in China's technological level. In the process of technological catch - up, phased goals should be established, and choices should be made to focus on one or several technical fields, gradually forming a leading advantage in the global semiconductor supply chain. On the other hand, the core significance of the new "national" mechanism lies in the integration of policy resources and scale effects. In the specific implementation process, we should avoid setting up too many new R&D institutions or innovation platforms for this reason. We can learn from the experience of developed countries, reorganize and optimize the scattered stock innovation resources in the form of innovation communities or technology clusters, and strive to promote cluster - based innovation with clear technological orientation and research and development task orientation.

3. Take Various Measures to Accelerate the "Diversified" Reconstruction of China's Semiconductor Supply Chain and Create a Healthy and Sustainable Development Ecosystem for China's Semiconductor Industry

From the long - term trends such as the acceleration of global digital transformation and the continuous enhancement of the strategic nature of semiconductors in national security, it is difficult for the U.S. technological blockade against China to fundamentally change. Therefore, in addition to fully promoting self - reliance in core technological fields, the development of China's semiconductor industry also needs to carry out strategic balancing of different technological systems to reduce the risk of geopolitical factors affecting China's semiconductor supply chain.


First, taking the opportunity that current countries and regions such as South Korea, China Taiwan, Japan, and the EU are increasing investment in semiconductor manufacturing and global production capacity is accelerating expansion, give full play to China's super - large market advantage and capital advantage, and establish supply chain strategic partnership relations with more countries and regions through bilateral or multilateral strategic investment cooperation, accelerating the diversification of China's supply chain global layout; Second, in view of the strategic nature of "semiconductors", major countries and regions such as the EU, Japan, South Korea, the UK, and China Taiwan are accelerating the diversified reconstruction of the supply chain. This is an important opportunity for China to further optimize the supply chain layout. China can use its advantages in the scale of science and engineering talents and the cluster of electronic industries, take the development of semiconductor materials, manufacturing equipment, and application - oriented chips as the main body, and actively lay out technological innovation networks globally, improving the toughness of China's semiconductor supply chain from the technical source.

4. Strengthen the Top - Level Planning of the Domestic Semiconductor Industry Layout and Handle the Strategic Relationship Between Short - Term Response to Chip Shortages and Cultivation of Long - Term Competitive Advantages

Coping with the U.S. technological blockade and achieving breakthroughs in core semiconductor technologies is actually a long - term development issue, which cannot be solved by simply expanding short - term production capacity. According to Tianyancha data, there are currently about 282,000 enterprises in China whose names or business scopes contain "integrated circuits or chips", and more than 70,000 enterprises were registered in 2020 alone, while only 22% of enterprises have a registered capital of more than ten million. This development pattern does not conform to the technical characteristics of the semiconductor industry, and it is not excluded that there are short - term policy "arbitrage" behaviors among enterprises and localities. With the expansion of advanced chip production capacity in developed countries and the upgrading of chip demand driven by technological progress such as artificial intelligence, automation, and electronics, China is likely to fall into a passive situation of large - scale overcapacity in the mid - to - low - end chip field, and measures need to be taken as soon as possible to adjust. On the premise of protecting enterprises' investment enthusiasm, every effort should be made to avoid a large amount of investment from flowing into the mid - to - low - end chip manufacturing field in a disorderly manner.


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