“Within a few years, China will consume more than half of the world’s semiconductors. Yet the country produces only about 15% of the semiconductors it consumes—up from 10% a few years ago, but still a long way from closing the gap between supply and demand.
Not surprisingly, China would like to play a larger role in the global semiconductor industry, producing more of the chips that go into smartphones, tablets, sensors and other consumer and industrial devices, whether for domestic demand or eventual export.
Toward that goal, China has built up several semiconductor clusters across the country. Over the next 10 years, its national and provincial governments plan to invest as much as an additional 720 billion renminbi ($104 billion) in its domestic semiconductor industry. This investment will help meet demand while supporting China’s strategic interests in developing semiconductors for sensitive industries such as defense or telecommunications, reducing its dependence on international chipmakers.
However, as other countries have discovered before, new entrants face high barriers when entering the semiconductor market in terms of capital (which China has) and top engineering talent for both design and process technologies (which is more difficult to attract and retain). Therefore, as it has in other sectors, China is making strategic decisions to partner with and acquire companies in order to obtain the talent and intellectual property it needs to compete and win.”