The Chinese government’s launch of its third iteration of the “Big Fund” in May was a response to the country’s insatiable demand for homemade chips. This $48 billion investment is aimed at boosting the domestic semiconductor industry by expanding the manufacture of microprocessors. The move is similar to efforts being made by the United States and the EU, with both regions also providing significant cash injections to encourage local chipmaking.
However, despite these efforts, Chinese chipmakers are facing challenges due to restrictions imposed by the American government in October 2022. The export of advanced chips and chipmaking equipment to China, using American intellectual property, has been limited. This restriction makes it extremely difficult for Chinese firms to produce cutting-edge microprocessors with transistor sizes in the nanometre range that power the latest AI models.
Despite these limitations, Chinese companies are still able to produce less advanced chips with larger transistor sizes, which are used in a wide range of consumer products like televisions, thermostats, refrigerators, and cars. However, this has left them vulnerable to foreign competition in certain areas.
Overall, China’s semiconductor industry is facing roadblocks due to limitations on access to advanced chip technology. The government’s investment in expanding chip production is a crucial step towards reducing the country’s reliance on imports and strengthening its domestic chip manufacturing capabilities. By focusing on producing less advanced chips and other semiconductor products, Chinese companies can continue to meet the growing demand for chips in various consumer electronics and industrial applications.