According to analysts and industry insiders, China has been forced to make a course correction in its pursuit of semiconductor self-sufficiency, focusing instead on increasing production of mature technologies while putting the goal of catching up with the world’s most advanced chip makers on the back burner.
The change serves as a warning lesson for Beijing in its efforts to reduce its reliance on American technology. Despite President Xi Jinping’s strong political will, the government’s considerable financial assistance, and the enthusiasm of domestic players, China faces the harsh reality that its chances of becoming self-sufficient in sophisticated chips are slim. Only TSMC, Samsung, and Intel have remained in the race below 10nm, so analysts say it makes sense for Chinese companies to concentrate their efforts on mature chip technology.
Chinese producers have made some headway in manufacturing high-end photoresists, which are crucial materials in the lithography process, in recent years. Last Monday, the US added another 12 Chinese corporations to its “entity list,” in what has become nearly typical.
Three quantum communications businesses (for their involvement in aiding the military) and New H3C, a joint venture between HPE and Tsinghua University, are among the most recent inclusions.
They join a long list of IT, AI, and electronics companies suspected of having military ties. Huawei and Fiberhome, a state-owned optical producer, are major additions from the telecom sector, while neither ZTE nor any of the telecoms have been included. Other restrictions have been imposed on telecom companies. They were all delisted from the New York Stock Exchange earlier this year as part of an investment restriction, and they are no longer allowed to land cables or conduct services. China’s countermeasures are proliferating at the same rate as the United States’ actions against China’s tech sector. China’s ambition to replace foreign technologies with its own is one example. That isn’t new in and of itself; China has been promoting “indigenous innovation” since 2009.
However, in the light of present tensions, this appears to be speeding up. According to Bloomberg, the Chinese government is putting together a list of authorized IT providers who will only supply sensitive areas like financial services and data centers.
Already 1,800 Chinese IT hardware, networking, and software suppliers have been invited to a key industry panel that will set standards. Big foreign brands like Apple, Microsoft, and Ericsson are barred since membership on the committee are limited to corporations that are no more than 25% foreign-owned. The new Data Security Law, which requires that “national core data” and other yet-to-be-defined types of data be maintained in China and restricts data cooperation with foreign authorities without clearance, is another tech move intended at restraining foreign enterprises in China.
Yahoo, Fortnite, and Linkedin have all declared their exit from the China market in the last month, indicating the more difficult climate.
