The US has ramped up measures, including export controls, to contain China’s chip-making capabilities in recent years. Christopher Thomas, chairman of Integrated Insights, says it’s been difficult for semiconductor firms to decouple even as they navigate the restrictions. He speaks with Yvonne Man, David Ingles and Annabelle Droulers on “Bloomberg: The China Show.”
The discussion focuses on global competition in the semiconductor industry, highlighting the interplay of geopolitics, technological advancements, and supply chain dynamics.
- Current Landscape: Despite ongoing geopolitical tensions and efforts to de-risk supply chains, the semiconductor industry remains fundamentally competitive, driven by the quality and performance of products. Taiwan has increased its share in global semiconductor manufacturing despite attempts to diversify.
- Optimism in Chinese Companies: Participants in the industry, including Chinese companies, express optimism about growth. They see opportunities in automotive electrification rather than just AI, where China’s downstream industry control is stronger. There is still significant respect for the U.S. semiconductor ecosystem regarding talent and investment.
- Performance Gap with the U.S.: China lags behind the U.S. in advanced chipmaking capabilities by about 3 to 5 years, particularly in manufacturing processes. However, Chinese firms are developing smaller AI models that do not require the most advanced technology, allowing them to remain competitive without relying on cutting-edge performance.
- Technological Restrictions: Restrictions on advanced technologies like EUV (Extreme Ultraviolet) lithography are impacting Chinese companies, forcing them to develop their own servicing capabilities. While short-term constraints may slow progress, long-term investments in in-house capabilities could enhance their competitiveness.
- Global Market Access: Chinese semiconductor firms can attempt to enter global markets through partnerships or by selling products made with their chips. However, the majority of chip-buying decisions are still made by the U.S. and its allies, making it essential for China to penetrate this broader market to achieve scale.
- Limited Decoupling: Complete decoupling of supply chains is viewed as impractical due to capital and resource constraints. Many companies prioritize performance and price over the nationality of suppliers, suggesting that the industry remains interconnected.
- Future Considerations: Companies are preparing for geopolitical restrictions but are not proactively splitting operations for different markets. A potential split in operations could lead to a significant increase in joint ventures, but this has not yet materialized.
Overall, while challenges from geopolitical factors and technology restrictions exist, the semiconductor industry continues to innovate, and firms are adapting to maintain competitiveness.