Tech war: Chinese chip makers ramp up capacity amid fears of more US sanctions

Chinese foundries, such as Semiconductor Manufacturing International Corp (SMIC) and Hua Hong Semiconductor Group, are ramping up capacity amid fears of more US tech sanctions, according to an industry report.

While the country’s chip makers lag behind players such as Taiwan Semiconductor Manufacturing Co (TSMC) and Samsung Electronics in chip-processing technology, they are “actively” increasing investment in new capacity to accommodate the demand for legacy chips used in applications such as cars and consumer electronics.

The total capacity of China-based foundries will grow 15 per cent to 8.9 million wafers per month this year, and 14 per cent to 10.1 million next year, exceeding the average global growth of 6 per cent and 7 per cent for the same period, according to a report from SEMI, a US-based industry association.

As a result, China is expected to account for about 30 per cent of the world’s total wafer capacity next year, SEMI said.

“Despite potential risks, China is actively increasing investment to ramp up foundry capacity, partly due to its efforts to alleviate the impact from [US] export controls,” the association said in the report. Chinese chip makers including Nexchip, SiEn (Qing Dao) Integrated Circuits Co, and memory chip maker ChangXin Memory Technologies, are all expanding.

The investment pace has already triggered overcapacity concerns, with Washington firing the first salvo. The Biden administration will apply tariffs to US$18 billion worth of Chinese imports, including a 50 per cent hike on semiconductor imports from China starting next year, to protect the local US chip industry.