China’s chip industry is prioritizing mature nodes and innovative packaging to bypass Western sanctions and build self-reliance, reshaping global supply chains.
China’s semiconductor industry is pivoting toward mature process nodes (28nm and above) and advanced packaging technologies to circumvent U.S. export controls and reduce dependency on Western technology. With SMIC and Hua Hong Semiconductor expanding production capacity, and a $40 billion government fund backing domestic R&D, China aims to create a parallel chip ecosystem.
China’s mature node strategy gains momentum
While global leaders like TSMC and Samsung race toward 2nm and below, China is doubling down on mature semiconductor nodes (28nm and above). According to Digitimes, SMIC reported a 19% revenue increase in Q1 2024, driven by strong demand from automotive and industrial sectors. Hua Hong Semiconductor similarly plans to expand its 28nm capacity by 30% this year, targeting IoT devices.
“China recognizes it can’t win the advanced node race under current restrictions,” said semiconductor analyst Mark Li of Bernstein Research. “But there’s enormous demand for reliable mature-node chips in growing sectors like electric vehicles and industrial automation.”
Geopolitical pressures accelerate self-reliance
The U.S. tightened export controls on semiconductor equipment in May 2024, specifically targeting ASML’s DUV lithography tools crucial for advanced node production. In response, China announced a $40 billion semiconductor investment fund in April to boost domestic capabilities, as reported by Reuters.
Burn-Jeng Lin, former TSMC R&D VP, noted: “China is building an entire semiconductor ecosystem – from materials to packaging – that could eventually operate independently of Western technology.”
Advanced packaging emerges as competitive edge
With progress in advanced nodes constrained, Chinese firms like CXMT are pioneering chiplet designs and 3D packaging. The Information reports plans for mass production of chiplet-based designs by late 2024, potentially allowing China to compete in performance without cutting-edge processes.
This strategic shift could reshape global supply chains, creating parallel semiconductor ecosystems with differing standards and technologies over the coming decade.
