Make or break? The restructuring of China’s semiconductor industry caught between the dilemma of global integration and disintegration

Keywords: Semiconductor, Upgrading, Global value chains, China, Geopolitics, Chip war
Abstract Type: Paper Abstract

Abstract

Under Washington’s escalating sanctions, the Chinese government and top chipmakers are determined to speeding up efforts to cut reliance on U.S. and global supplies. In addition to placing semiconductor industry at the center of the “Made in China 2025” national strategic plan since 2015, China has rolled out two phases (2014 & 2019) of massive investments through the national ‘IC Big Fund’ into numerous leading firms across the entire semiconductor value chain. Moreover, Shenzhen in 2021 announced the establishment of international sourcing platform for semiconductors aimed at boosting China’s semiconductor independence. Meanwhile, the U.S. government has sought to ally with Japan, South Korea, and Taiwan through the so-called ‘Chip 4 alliance’ to raise more barriers to China’s semiconductor development. Based on empirical investigations, this paper makes an effort to document the recent functional and spatial restructuring of various segments of the semiconductor value chain, both private and public, in mainland China. Based on preliminary findings, we assess the prospect for China’s semiconductor upgrading and self-sufficiency, under intensified geopolitical pressures.