The US-China trade war and sanctions from Washington against tech giant Huawei have given the Chinese government an opportunity to reduce its dependence on the US for technology.
Yangtze Memory Technologies Co (YMTC) factory in Wuhan, China. (Source: Nikkei Asian) Rise of the chip manufacturing business Once a month, senior executives from Yangtze Memory Technologies Co (YMTC) fly to Beijing for a series of meetings with China’s top economic regulators. They focused on the company’s efforts in developing some of the world’s most advanced computer memory chips. Headquartered in downtown Wuhan, YMTC is considered a pioneer in efforts to create the domestic semiconductor industry. YMTC has mass-produced state-of-the-art 64-layer and 128-layer NAND flash memory chips, which are used in almost every electronic device from smartphones to servers to cars. These things help YMTC compete with big players in the industry such as Micron Technology of the US or Samsung Electronics of Korea. Equipment used to make high-end computer chips is mostly imported in the US. Some chip design and manufacturing processes such as etching, ion implantation, electrochemical deposition, design software… are all in the hands of American companies. To manufacture without using American technology is a big challenge for a new company that has been operating since 2016 like YMTC and also represents China’s great ambition in the field of semiconductor industry development. especially after the economic sanctions that the US imposed on China. However, the dizzying rise of YMTC has shown China’s strength in the chip industry. The business started in 2016 and within four years has mass-produced some of the most advanced 3D NAND flash memory chips in the world. The Beijing government also recognizes the importance of developing the semiconductor industry and makes efforts to support these companies. “Competition for chips is increasing as all major economies, not just China, have realized the importance of chips,” said Roger Sheng, a chip analyst at consulting firm Gartner. Semiconductors”. Currently, YMTC, is still in the “target” of the US government. But under the guidance of the Beijing government, they have conducted a review of the supply chain, looking for local component suppliers, or non-US suppliers, to gradually eliminate the country’s dependence on technology. Based in the city of Wuhan, YMTC’s efforts did not stop even when the SARS-CoV-2 virus causing the Covid-19 pandemic wreaked havoc last spring. According to sources familiar with the matter, after Wuhan reopened in April 2021, YMTC mobilized hundreds of engineers stationed inside the production campus, working three shifts a day with the aim of overhauling all production processes and replace as many foreign imported components as possible. Efforts to localize production The effort to localize chip production is an opportunity for a new generation of Chinese chipmakers like YMTC. Chinese President Xi Jinping said in remarks published in January 2021: “We must strengthen self-innovation and make breakthroughs in some core technologies as soon as possible.” According to the Nikkei Asian , plans to end dependence on the US have long been carried out by China and massively invested by the state, but progress is still very slow. For example, the plan to self-produce semiconductors has a target of 70% by 2025. But of the total revenue in 2020, China’s semiconductor manufacturing enterprises account for only 5.9% of sales. domestic products, while foreign companies with headquarters in China account for the rest of sales in the country. According to the Magazine China Stocks , while the threat of sanctions from the US has always lingered, the source of state aid, with subsidies and investments from local governments and the private sector has amounted to at least 170 billion USD since Since 2014 has helped chip manufacturing enterprises to localize production efforts. In addition, orders from domestic technology giants such as Xiaomi, Oppo, Vivo and Lenovo are also the reason their production is guaranteed. 
The US sanctions are a wake-up call for China’s semiconductor industry. (Source: Nikkei Asian) In fact, the trade war with the US and its sanctions against technology giant Huawei have given the Chinese government an opportunity to decouple from the world’s largest economy. – something they’ve always wanted. The US sanctions seem to have removed the main obstacle for domestic consumers, who always prefer to use chips from foreign suppliers. The manager of a chip maker in China told the site Nikkei Asian : “In the past, domestic chipmakers used only the manufacturing equipment that all the world’s leading chipmakers such as Samsung and Intel use in their production lines. Who wants to use and try new products without being sure of the quality of the production?” However, when sanctions from the US appeared, Chinese manufacturers considered alternatives, and domestically produced chip products were a reasonable choice. The manager emphasized: “It also means that domestic enterprises have really had the opportunity to test and upgrade their products – the goal that the whole country is aiming for.” Roger Sheng, a semiconductor analyst at Research Gartner, found that the US-China tensions confirmed the view that it was necessary to localize production. Now, the whole country agrees that building a semiconductor industry is possible and increasing self-reliance is a top priority. Unbreakable bond? Despite China’s considerable efforts, not many experts believe that the country’s chip sector will be completely separate from the US. The world’s two largest economies are still linked, dependent on each other and also two large semiconductor markets. According to a January report by the Brookings Institution, Chinese businesses account for at least 25% of the sales of most US chip businesses, and not everyone wants to break out of the market altogether. Chad Bown, an expert at the Peterson Institute for International Economics, said the US President Joe Biden’s approach to China was still unclear. On the one hand, the US expects China to buy more chips as promised in recent trade talks but also continues to restrict China’s use of US technologies. Since 2018 to date, a total of 162 Chinese entities have been sanctioned by the Trump Administration. In April 2021, the US Department of Commerce also added seven Chinese “supercomputer” entities to the economic blacklist, to restrict these businesses from using US technology. In reality, it is still difficult to completely decouple the supply of semiconductors, which involve thousands of suppliers from around the world and have been closely intertwined for decades. China may try to reduce its dependence on the United States, but without American sources of technology, it is unlikely to accelerate its technological progress. But Miin Wu, founder and president of Macronix International, a leading memory chip maker in Taiwan (China) that serves Apple, Sony and Nintendo, stressed: “In the short term, due to geopolitical uncertainties China’s technological development may be slowed down. However, in the long run, China will certainly hope to build a competitive semiconductor industry.” (according to Nikkei Asia)
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