Even as China spends billions to build up its domestic semiconductor sector, it is still some time away from reaching the skills needed to manufacture cutting-edge chips, an analyst said on Wednesday.
Semiconductors are used in everything from smartphones and computers to cars and household appliances.
“I still think so [China is] probably three or four generations behind what is considered a leader,” Mario Morales, group vice president for enabling technologies and semiconductors at International Data Corporation, told CNBC.Squawk-Box Asien.”
“So if you look at Leading Edge, we’re talking about 16 nanometers or 14 nanometers and below. Most of that comes mainly from Taiwan and Korea, and to some extent from the US, with Intel,” adds Morales.
Chips are made using a process called lithography where highly complex and expensive machines shine very narrow beams of light at silicon wafers that have been treated with “photoresist” chemicals to create intricate patterns.
Employees work on the silicon wafer production line at a factory of GalaxyCore Inc. in Jiashan county, Jiaxing city, Zhejiang province, China, 25 May 2021.
Guo Junfeng | Visuelle China-Gruppe | Getty Images
For several years, China has talked about doing more — such as spending extra money on research and development — to achieve self-sufficiency in science and frontier technologies, including semiconductors and artificial intelligence.
IDC’s Morales explained that despite heavy investment from China, the country still needs access to the software and equipment needed to manufacture the high-end chips.
That’s what analysts said previously that Chinese semiconductor companies focused on legacy long-tail technologies are likely to do well. These companies essentially produce a variety of less advanced chips for areas such as power management, microcontrollers, sensors, and other consumer-related segments to meet growing local demand. These chips are still considered very important for the entire supply chain.
“There you will see how part of the Chinese ecosystem is thriving and growing and starting to gain market share,” IDC’s Morales told CNBC. “But China will take time, it could be more than a decade before they actually become more competitive, at least at the top.”
He referred to SMIC, China’s largest and most important chip maker.
“They have the ability to support 28 nanometers and they’ve started with some samples of 14 nanometers,” Morales said. “But the reality is they need customers to really scale that capability, and much of the Chinese ecosystem just isn’t using that technology.”
“So they need US partners and customers or European customers or even Taiwanese customers to effectively ramp up this technology so they can lower the cost structure they need,” he added.
— CNBC’s Sam Shead contributed to this report.