China Boosts Domestic Chipmaking Amid U.S. Export Bans

U.S. Export Bans

China has intensified efforts to build a self-reliant semiconductor ecosystem as geopolitical tensions escalate and the world grapples with Trump’s tariffs and a potential new wave of U.S. export bans. China has dramatically accelerated its domestic semiconductor production and is expected to continue with this trajectory for the next few years. China’s chip production hit new records in 2023, with domestic facilities ramping up output to fill supply gaps. While the global chip market grapples with trade fragmentation. China’s state-backed investments in AI chips and lithography tools aim to break its tech dependence on the West, blunting the impact of U.S. export bans.

• In October 2023, China manufactured more than 30 billion chips, the highest monthly output since 2021. This surge came amid tightening U.S. restrictions that barred Chinese firms from accessing cutting-edge chip technology, particularly for AI and HPC (High-Performance Computing) applications.
• In FY24, SMIC reported a 50% surge in domestic orders, largely fueled by Huawei, electric vehicle makers like BYD, and surveillance hardware producers. These companies are now prioritizing “homegrown chips” amid tightening restrictions by the U.S. and allies.
• According to Republic World, China’s chip industry received over $150 billion in state-backed funding through the “Big Fund” and new provincial subsidies. This financial push is accelerating domestic innovation and allowing national champions to bypass Western supply chains.
• The U.S. has restricted exports of NVIDIA's A100 and H100 GPUs and imposed licensing requirements for U.S.-built tools like ASML’s EUV lithography systems. As a result, Chinese tech giants like Huawei and SMIC have turned to older-generation nodes (7nm and above) and developed indigenous architectures such as Ascend and Kunpeng.
• Despite sanctions, Huawei’s 2023 launch of its 7nm Kirin 9000s chip stunned observers, showcasing China’s resilience. This signals growing capabilities in manufacturing advanced chips, even under sanctions, through domestic foundries like SMIC.
• U.S. pressure has also led to American chipmakers asking suppliers to cut ties with Chinese firms, further decoupling the tech ecosystem. The Business Standard reports that the U.S. Commerce Department's blacklisting of 30+ Chinese AI firms has created urgency for China to strengthen its semiconductor independence.