According to the South China Morning Post, the restrictions imposed by the United States on semiconductor exports may be somewhat counterproductive. In the first quarter of this year, the production of traditional semiconductor chips in China surged by 40%, indicating that China is expected to become the world's leader in traditional chip manufacturing.

One important reason for such a significant increase is that those "low-end chips", which use 28 nanometers or even older technology, are still not subject to trade restrictions. The United States deliberately did not include these chips in the scope of sanctions because they are important for many essential items such as household appliances (such as toasters, telephones, medical devices) and vehicles. If these supply chains break down, it may trigger global problems.

The United States still believes that these old chips pose little threat to national security (at least not as great as new chips). As a result, China's production of old semiconductor chips reached a new high, reaching 36.2 billion units in March. The report points out that China's production in the past three months has almost tripled compared to the first quarter of 2019, when China began to work hard to bring chip production back to the domestic market.

The sanctions imposed by the United States have led to most of China's new investments being focused on mature semiconductors rather than cutting-edge semiconductor nodes. The full support of the country has also played a significant role, which can be said to be the main driving force behind China's significant increase in production - to the extent that there is now a bit of overcapacity.

At this pace of development, China is rapidly becoming a leader in the world's traditional chip production. By 2027, China's global market share in mature process production capacity is expected to increase from 31% last year to 39%. If the United States continues to maintain its current policies, this trend may continue. Due to the lack of better options, China can only rely on older technologies to produce chips, as it has not yet been able to compete with giants such as Intel and TSMC in cutting-edge technology. China urgently needs to achieve self-sufficiency in the chip industry, but currently does not have the ability to manufacture high-end lithography equIPMent required for cutting-edge microchip processors.

But on the other hand, China still has a high demand for imported chips (which is the chips it can currently import). In fact, the report shows that in the first quarter of 2024, the import of Chinese semiconductors increased by 12.7%, indicating that China still has a long way to go in pursuit of self-sufficiency in the chip industry (at least for now).

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