context: Reflecting on the US chip ban against the PRC, industry analyst Zhang Hexun says that the US chip ban could exacerbate tensions, prompting China to impose its own tech export ban. The ban does not seem to be working as expected, backfiring to hurt US chip firms and pushing the PRC to accelerate its transition towards chip self-reliance, according to Zhang.
Against the backdrop of the chip war, the PRC has been feeling greater urgency in meeting its goal of a 70 percent self-sufficiency rate by 2025 (compared to 16.7 percent in 2021), writes Zhang Hexun 张河勋 industry analyst and EE Times China columnist. While the PRC’s manufacturing industry was significantly impacted by the chip shortage, local chip makers were afforded opportunities that did not exist when the international supply of chips was abundant, comments Zhang. 2021 saw a boom in investments and company registrations in the PRC, with close to US$9 bn VC investments in the industry (compared with US$1.3 bn in the US) and 23,000 new registered companies in the industry (a 97 percent y-o-y increase). Despite this, the main bottlenecks still hold, among which are lithography machines and upstream wafer materials. Zhang says that one direct result of the US chip ban is increased costs for Western manufacturers and their customers. The ban will increase inflationary pressure on many products, especially because the PRC has captured the market share for cheap chips used in nearly all consumer electronics and industrial equipment and its firms account for nearly one-fifth of the world’s semiconductor production. Zhang also predicts that if the PRC continues to make progress in chip manufacturing, then it may also impose similar export bans on its own technology and products, in addition to purchasing more chips from domestic companies. Some US manufacturers, such as Qualcomm and NVIDIA, have come up with workarounds under the ban by providing customised products to key PRC-based customers. Despite the ban on ASML equipment, two Chinese chip companies still got their hands on ASML lithography machines. At the same time, PRC companies are taking action to reduce their reliance on US parts. A study found that the proportion of US components in Huawei’s 5G Small Cell base station has dropped to 1 percent.