How US trade pressure will strengthen China’s semiconductor supply chain in 2021

Despite short-term struggles, escalating US restrictions will bolster China’s domestic semiconductor industry in the long-term. At Yole Développement (Yole) we follow this industry and deliver our vision all year long through an impressive collection of technology & market reports as well as monitors: Status of the Advanced Packaging Industry, Status of the Power Electronics Industry, Status of the Memory Industry, the Advanced Packaging Quarterly Market Monitor, Power SiC: Materials, Devices and Applications… Discover them on i-Micronews.

Without a doubt, the US-China trade war has shone a geopolitical spotlight on the semiconductor industry. From the initial tariffs placed on semiconductors from China back in 2018 to the strict export controls that followed, US policy was designed to stifle Chinese industry while supporting domestic semiconductor businesses.

So far, both sides have suffered and will continue to do so for some time yet. But eventually China will emerge smarter and more efficient. Why? Because you cannot block a nation of 1.4 billion people that wants the best smartphones, the best computers, and quite simply, the best of everything.

US political pressure has, to date, taken its toll on the Chinese semiconductor industry with manufacturers being forced to hoard chip supplies to mitigate demand shortages. However, the Chinese government and its people are smart, and since the trade tensions first came into force, investment in China’s home-grown semiconductor industry has been steadily rising to counter US restrictions.

China-based OEMS and other companies have been investing in research and development and also honing IP around chip manufacturing, including the complex wafer development and epitaxial growth typically provided by US players in the past. At the same time, chip manufacturers have been expanding capacity and investing in new fabs, with a view to shifting chip design and production into mainland China.

As a result, over the next few years we can expect to see significant growth in the China-based semiconductor industry. Then, with domestic capacity in place, China will start to export semiconductor chip and components to the rest of the world, and the impact on the global semiconductor industry will be profound. Within the next decade, the nation will most certainly be competing with the US, European, Japanese and Taiwanese semiconductor industries.

So, from China’s point of view, US political pressure and the trade tensions will eventually have a positive effect. The restrictions have in fact accelerated investment in its semiconductor supply chain, which will lead to a strong, self-sufficient, sustainable industry sooner rather than later.

China is a very large country with very bright minds and a lot of money, so applying trade restrictions will only have a detrimental effect in the short-term. It is now only a matter of time before China is home to a huge semiconductor industry with a solid supply chain.

About the author

Jean-Christophe Eloy is President and CEO of the Yole Développement company. Created in 1998, the market research & strategy consulting company has grown to become a group of companies providing marketing, technology and strategy consulting, media in addition to corporate finance services. His mission is to oversee the strategic direction of Yole Group of Companies.
With System Plus Consulting, Blumorpho, PISEO and Yole Développement, Yole Group of Companies has developed a unique understanding of technologies to accurately evaluate markets, applications, solutions and strategies.
With more than 70 analysts, including PhD and MBA qualified industry veterans, the group collects information, identifies trends, challenges, emerging markets, and competitive environments and then turns that information into results to give a complete picture of the industry’s landscape.
All year long, Jean-Christophe builds deep relationships with leading semiconductor companies, discussing and sharing information across his global network. His aim is to get a comprehensive understanding of their strengths and guide their success.