Is it true that China has grown its microchip industry despite the US sanctions over last 4 years?

In a sense, the sanctions on China which began with the restrictions on Huawei, may have proven to be a blessing in disguise for China. That is because, during this period, China has been growing much faster than any other country in the world. In fact, the numbers are fascinating. As per the chip industry data, nineteen out of the twenty fastest growing microchip companies are Chinese. This number was just eight on year back, so the moral of the story is that China has made rapid strides in microchips despite US sanctions.

The interesting factor is that China-based suppliers of design software, processors and chipmaking gear are growing their revenues at several times that of Taiwan Semiconductors, the world’s largest fab factory. China is likely to take a much bigger share of the $550 billion microchip industry in the next few years. Microchips hold the key to futuristic technologies like artificial intelligence, machine learning, IOT, auto cars etc. But, how did China make such a big outcome from the opportunity.

Beijing is channelling billions of dollars into microchips. One of its ambitious programs called “Little Giants” supports, mentors and bankrolls local tech companies and encourage tactics to sidestep US sanctions. The most effective testimony comes from Apple. It is now closely evaluating Yangtze Memory Technologies to appoint the company as its latest supplier of iPhone flash memory. Apple has a long and fruitful relationship with China since the days of the iPhone and this would just be a logical extension and a diversification from TSMC.

The lockdowns also came as a blessing. Chinese customers using imported semiconductors had to mandatorily source homegrown chips. China desires to extricate itself from the $430 billion worth of imported chipsets in 2021. Chinese chip demand is up 58% yoy and is inching closer to $200 billion in sales. With a big chip advantage, China gets easy access to world markets as no country sanctions a reliable chip making partner. The best testimony is that most Chinese chip makers are now operating at close to 100% capacity utilization.