From isolation to independence: How China took its chip sector to the next level

Once regarded as an underachiever in the global semiconductor market, China's industry has experienced astonishing growth. The United States' sanctions and monitoring have spurred China's technological self-reliance, resulting in notable progress in artificial intelligence chips and memory semiconductors. Companies such as Apple, HP, Asus, and Acer are now incorporating Chinese-made chips into their products.

Trade statistics released by China's General Administration of Customs indicate that exports of integrated circuits reached US$216.02 billion in the first seven months of 2026, a surge of 99.5% year-on-year. This trend continues, as semiconductor exports constitute 8.6% of China's total export value, up from 3.5% in 2025. Chinese companies, bolstered by their domestic production expertise, are expanding their influence in niche markets, driven by the escalating chip shortage driven by AI.

Even when accounting for the contributions from Samsung Electronics and SK Hynix's Chinese factories, China's share in semiconductor exports is growing rapidly. According to Omdia, China's memory company CXMT has expanded its monthly DRAM wafer production capacity from 200,000 in the first quarter of 2025 to 295,000 in the first quarter of 2026. The projected annual capacity will increase from 3 million wafers in 2025 to 3.6 million wafers in 2026.

China's strides in semiconductor processing technology are equally impressive. The company aims to decrease the proportion of 20-nanometer-class processes from 38% in 2025 to around 2% in 2027, while simultaneously increasing the share of its 10-nanometer-class process from 62% to 93%. The second-generation 10-nanometer-class process is expected to commence mass production this year.

Additionally, Chinese firms like YMTC are rapidly advancing, with yearly wafer production rising from 1.77 million units in 2025 to 2.01 million units in 2026 and projected to reach 2.5 million units in 2027.

Despite the gap between Chinese and Korean companies, Chinese entities are rapidly closing the divide. For instance, SK Hynix plans to expand 321-layer NAND flash production to 50% of its domestic capacity. SpaceX CEO Elon Musk has even predicted that China is on the verge of solving the lithography problem, which is crucial for the production of ultra-fine semiconductors.

The Chinese government's support has been pivotal in this transformation. Established in 2014, the China Integrated Circuit Industry Investment Fund has contributed over 680 billion yuan towards the industry, including its third phase. Tax incentives, such as up to 10 years of corporate income tax exemptions for facilities producing semiconductors with a process of 28 nanometers or smaller, have further bolstered China's semiconductor industry.