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

China's semiconductor industry has transformed from being an underperformer on the global stage to a rapidly advancing force, largely driven by US sanctions and the country's push for self-reliance. This shift has led to notable advancements in artificial intelligence chips and memory semiconductors. Major semiconductor buyers like Apple are increasingly adopting Chinese-made chips, and other global PC manufacturers such as HP, Asus, and Acer are following suit.

China, which used to be the world's largest net importer of semiconductors, has seen a remarkable surge in exports, with integrated circuit exports reaching US$216.02 billion in the first seven months of 2026, marking a staggering 99.5% year-on-year increase. Memory sector exports have also increased by 3.5 percentage points from the previous year.

Chinese companies, having honed their production skills domestically, are now expanding their influence in niche markets, particularly as the chip shortage intensifies demand for general-purpose products. This surge in export profits is reinvested to further achieve semiconductor self-sufficiency. Despite Korean companies dominating the memory sector, Chinese companies are swiftly advancing and expanding their production capabilities.

For instance, CXMT, China's leading memory company, has seen a 47.5% increase in its monthly DRAM wafer production capacity. China's progress in semiconductor processing technology is also significant, with the share of its older 20-nanometer-class process expected to drop from 38% in 2025 to around 2% by 2027. The company aims to increase the share of its first-generation 10-nanometer-class process from 62% to 93%, with mass production of its second-generation 10-nanometer-class process expected to begin in the current year.

Similarly, YMTC, a Chinese semiconductor manufacturer specializing in NAND flash memory, has seen its yearly wafer production rise from 1.77 million units in 2025 to 2.01 million units this year, with projections to reach 2.5 million units by 2027. While there is still a considerable gap between Chinese and Korean companies, Chinese firms are rapidly closing this gap, supported by a strengthening domestic industry ecosystem.

China's government has also played a crucial role, providing substantial funds through the China Integrated Circuit Industry Investment Fund and offering tax incentives for production facilities using advanced semiconductor processes. This government support, including research and development expense deductions and policies to foster domestic equipment and materials, has significantly contributed to China's rapid growth in the semiconductor industry.