China’s Chip Production Growth Doubles as Tech Giants Invest Big in Chipmaking

Chinese semiconductor production surged 33 percent last year, double the country’s growth from 2020, the South China Morning Post reported last week.

The news coincides with a report by GlobalData that concludes semiconductors and 5G technology will continue to be an area of geopolitical tension in the foreseeable future.

“In 2022, the global dependency on Taiwan Semiconductor Manufacturing Company (TSMC) will remain a chokepoint for the global tech economy,” Daniel Clarke, an analyst with GlobalData, told Electronic Products & Technology. “China’s lead in many advanced tech sectors is glaring, and US and European policymakers are starting to wake up to the implications of being behind on core technologies.”

Last March, the National Security Commission on Artificial Intelligence recommended Congress tighten restrictions on semiconductor manufacturing equipment (SME) to prevent China from surpassing the United States in semiconductor design and production capabilities.

“China is making an aggressive push to promote authoritarianism around the world,” an official with the Commission told Reuters. “It boils down to semiconductors.”

Last week CNBC also reported that amid chip shortages caused by U.S. export restrictions on companies like SMIC and Huawei, Chinese tech giants Tencent, Alibaba, and Baidu have begun investing significantly in semiconductor manufacturing.

Last year U.S. policymakers weighed adding the three companies, often referred to as the “BAT,” to the Entity List because of their ties to the People’s Republic of China (PRC) and People’s Liberation Army (PLA). “The Treasury Department’s concerns over investor sentiment and economic ripple effects outweighed the State Department’s and Pentagon’s worries about Chinese civil-military ‘fusion,’” Lawfare wrote in January 2021.

China’s growth in chip production is concerning particularly as U.S. policymakers have deemed it a critical industry. It calls into question the policy efforts to incentivize domestic production and diversify the supply chain (See CTT’s report with the Coalition for a Prosperous America on “Maintaining U.S. Leadership in Semiconductors and Countering China’s Threats”). Unfortunately, it’s not clear that U.S. policymakers have a coherent strategy to protect and promote this critical industry.