How did China do it?
In 1986, China launched the 863 Programme, a state-backed initiative that focused on R&D investment in microelectronics as a strategic anchor for future economic growth.
Beijing propped up its nascent semiconductor industry through subsidies, tax breaks, cheap land and state-backed investment funds.
China’s chip behemoth Semiconductor Manufacturing International Corporation (SMIC) was founded in 2000 by Taiwanese-American semiconductor veteran Richard Chang in Shanghai. Backed by substantial state support, SMIC rapidly expanded and became mainland China’s largest contract chip manufacturer.
SMIC recruited thousands of engineers from the US, South Korea, Taiwan and Europe as the country imported not just chip-making equipment but also knowledge workers.
At the same time, China gradually became the world’s factory for electronics. Since smartphones, computers, appliances and telecom equipment are assembled in China, chip manufacturers naturally cluster around these supply chains. The country’s vast domestic market also guaranteed demand. This environment provided the foundation for the spread of know-how.
In 2014, the Chinese government set up the National Integrated Circuit Industry Investment Fund (the Big Fund) to inject billions of dollars in domestic manufacturing capacity to make high-end projects such as DRAM memory chips.
Another factor that accelerated China’s homegrown tech sector was the US-led sanctions. The roadblocks erected in the path of Chinese companies pushed SMIC and Huawei to intensify efforts to develop indigenous alternatives to foreign technology.
China still faces limitations as it can’t access extreme ultraviolet (EUV) lithography machines produced by Dutch company ASML, which are essential for producing advanced chips. ASML has stopped shipments to China under US pressure.
In 2022, SMIC shocked the tech world when analysts discovered that, despite lacking access to the most advanced EUV lithography machine, the company had developed a 7nm processor.
Related
