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US sanctions transform China into legacy chip production juggernaut — production jumped 40% in Q1 2024

🌈 Abstract

The article discusses how U.S. semiconductor export sanctions have inadvertently led to a surge in China's production of legacy semiconductor chips, with output jumping 40% in Q1 2024. This suggests that China could become the global leader in legacy chip production.

🙋 Q&A

[01] US Sanctions and China's Legacy Chip Production

1. What led to the surge in China's production of legacy semiconductor chips?

  • The U.S. purposefully excluded older 'mature' chips (utilizing 28nm or older process technology) from its export sanctions, as these chips are widely used in various devices and disrupting their supply could cause global issues.
  • This allowed China to focus its investments and production on these mature semiconductors, with heavy state-backed support driving huge production gains.

2. What is the impact of this trend on China's position in the global legacy chip market?

  • China's mature-process production capacity is expected to reach 39% of the global market share by 2027, up from 31% last year.
  • If the U.S. continues to enforce its current regulations, China is headed toward global dominance of legacy chip production.

3. What are the limitations in China's semiconductor self-sufficiency efforts?

  • China still relies heavily on chip imports, as its semiconductor imports have grown by 12.7% in Q1 2024.
  • China lacks the proper lithography tools needed to build cutting-edge microchip processors, limiting its ability to compete with companies like Intel and TSMC on bleeding-edge process nodes.

4. What are the potential implications of China's dominance in legacy chip production?

  • The article suggests that the gap between legacy and cutting-edge chips may either become more prominent or diminish over time, depending on factors like the need for brute-force computing power (e.g., AI) and advancements in using fewer transistors.
  • The world should be prepared for China's "slippery industrial strategies" in the semiconductor industry.
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