Executive Summary (TL;DR)

China’s semiconductor industry is currently in a profound strategic paradox: on one hand, it is heavily reliant on external supplies for key technology nodes and faces unprecedented geopolitical pressure; on the other, this external pressure is catalyzing its internal innovation and industrial restructuring with unprecedented force. This report provides a deep analysis of this complex situation, revealing the current state, challenges, and future path of China’s semiconductor industry.

The core argument of this report is that under external pressures, exemplified by U.S. export controls, China’s semiconductor industry is accelerating the formation of a “dual circulation” system that is both connected to and relatively independent of the global mainstream ecosystem. The core driver of this process stems from the huge gap between its status as the world’s largest semiconductor consumer market and its domestic production capabilities. This structural imbalance is both its fundamental weakness and the powerful endogenous driver for its state-led industrial policies.

The analysis shows that China’s development across various segments of the industry chain is highly uneven. In Outsourced Semiconductor Assembly and Test (OSAT) and mature process nodes (28nm and above), China has achieved global competitiveness and is expected to take a dominant position, leveraging its vast domestic market demand and capital investment. However, in upstream core segments such as semiconductor equipment (especially lithography machines), Electronic Design Automation (EDA) software, high-end materials (like advanced photoresists), and advanced logic chip manufacturing (7nm and below), China still faces severe “chokehold” issues.

In response to the external blockade, China’s strategy is systematic. The unprecedented scale of the third phase of the National Integrated Circuit Industry Investment Fund (the “Big Fund”) signifies a “whole-of-nation” financial mobilization aimed at providing long-term, stable capital support for the self-sufficiency of the entire industry chain. National champions like Huawei (HiSilicon), SMIC, YMTC, JCET, and Naura are playing key roles in their respective tracks, leading technological breakthroughs and ecosystem development.

Looking ahead, the era of a single, integrated global semiconductor supply chain is over, and a “bifurcated” global landscape is forming. One ecosystem will be led by the United States and its allies, continuing to explore the frontiers of physics based on Extreme Ultraviolet (EUV) lithography technology. The other ecosystem, with China at its core, will dominate mature process nodes and explore alternative paths to high-performance computing through “asymmetric” technologies like advanced packaging and third-generation semiconductors. This report will provide a comprehensive and in-depth decision-making framework for policymakers, industry leaders, and strategic investors to understand and navigate this new, reshaped global semiconductor order.

Chapter 1: Global Context and China’s Market Position

This chapter aims to build a macro-analytical framework, quantifying the scale and cyclical nature of the global semiconductor industry and defining China’s core role within it—the world’s largest consumer market. It is the structural gap between China’s massive consumer demand and its domestic production capacity that serves as the fundamental driver of its industrial policy and the global geopolitical contest.

1.1 The Global Semiconductor Market: Scale, Opportunity, and Cyclical Trends

After a cyclical downturn in 2023, the global semiconductor industry is entering a clear upward phase known as the “silicon cycle”.¹ Forecasts from multiple market analysis firms confirm this recovery trend. The World Integrated Circuit Association (WICA) predicts that the global semiconductor market will reach $620.2 billion in 2024, a significant 17% increase from $530.1 billion in 2023.¹ Other market reports offer similarly optimistic outlooks, with growth forecasts ranging from 19.8% to 20.2%.² This strong rebound is supported by sustained monthly sales growth in the second half of 2024; for instance, global sales in November 2024 reached a record $57.82 billion, a 20.7% year-over-year increase.⁴

The long-term outlook for the industry is even more expansive. Structural demand, particularly from artificial intelligence, high-performance computing (HPC), and electrification, is expected to propel the global semiconductor industry to a market size of $1 trillion by 2030.⁵ This long-term growth trend provides enormous development space for all global players, including China.

1.2 China’s Market Scale: The Great Consumption-Production Gap

China’s position in the global semiconductor landscape is both crucial and unique. It is not only the world’s largest electronics manufacturing hub but also the largest semiconductor consumer market, consistently accounting for about 30.1% of global consumption.¹ This massive market demand serves as the most powerful “demand-pull” engine for the development of China’s semiconductor industry.⁸

However, this immense consumption capacity stands in stark contrast to its weak domestic production capability, creating a significant “consumption-production” gap. This gap is vividly reflected in its massive trade deficit. Taking 2019 data as an example, China imported $304 billion worth of integrated circuits while exporting only $101.5 billion, resulting in a net import scale of over $200 billion.⁹ This high degree of import dependency, covering nearly all key areas from logic chips to memory, exposes China’s entire information technology ecosystem to the risk of supply chain disruptions.

This structural imbalance between consumption and production is not merely an economic statistic but the core of the current global semiconductor geopolitical conflict. It reveals China’s most fundamental strategic vulnerability and explains why Beijing has elevated semiconductor self-sufficiency to the highest national security priority. From “Made in China 2025” to the massive investment of the third-phase “Big Fund,” all national-level industrial policies can be seen as systematic efforts to bridge this gap.¹⁰

1.3 Key Growth Engines: AI, Automotive Electronics, and Communication Technologies

The growth drivers of the global semiconductor market are undergoing a structural shift, moving from traditional PCs and smartphones to a trio of engines: artificial intelligence (AI), automotive electronics, and next-generation communication technologies.

1. Artificial Intelligence and High-Performance Computing (HPC): This is the most powerful current and future growth engine. The explosive development of large AI models has created a near-infinite demand for underlying computing power, directly driving a surge in demand for logic chips such as GPUs, FPGAs, and ASICs, with a growth rate expected to be 4% higher than the industry average.¹ Simultaneously, AI is also fueling strong demand for high-bandwidth, large-capacity memory chips.¹

2. Automotive Electronics: The “new four modernizations” of the auto industry (electrification, intelligence, connectivity, and sharing) are turning it into a “new continent” for semiconductors. The automotive semiconductor market is projected to grow by 16.7% in 2024, becoming the third-largest growth market.¹ From Advanced Driver-Assistance Systems (ADAS) to smart cockpits and power management systems for electric vehicles, the semiconductor value per vehicle is rising sharply.¹³

3. Communication Technologies: Although the infrastructure deployment of 5G networks has entered a stable phase, communication remains a cornerstone of the semiconductor industry. The communication semiconductor market is expected to grow by 17.9% in 2024.¹ The proliferation of 5G devices, the explosive growth of Internet of Things (IoT) devices, and the future development of 6G technology will continue to create stable demand for RF, connectivity, and processing chips.⁷

Notably, these global growth engines have huge markets and world-class end-user companies within China, such as internet giants in AI applications and leading brands in electric vehicles. This powerful “demand-pull” effect provides a unique advantage for local Chinese semiconductor companies: they can leverage the vast, protected domestic market to validate technology, iterate products, and scale up. This offers them valuable buffer and support on the difficult path to technological self-sufficiency.

Table 1: Global and China Semiconductor Market Snapshot (2024-2025)

Metric	Global Data	China Data	China’s Global Share	Key Drivers	Data Source
2024 Market Size	Approx. $620.2B	Approx. $186.7B (Consumption)	Approx. 30.1%	AI, HPC, Automotive, Communications	¹
2024 Growth Rate	17% ~ 20%	21.6% ~ 24%	-	AI Servers, NEVs, Domestic Substitution	¹
2025 Growth Forecast	11% ~ 13.2%	Expected to remain above global average	-	AI penetration into endpoints, data center construction	²
Core Strategic Conflict	Supply chain security vs. globalization efficiency	Gap between huge demand and weak domestic supply	-	-	⁸

Chapter 2: Deconstructing China’s Semiconductor Value Chain: The Long March to Self-Reliance

This chapter will conduct a detailed breakdown of the core segments of China’s semiconductor industry chain, assessing its progress and persistent bottlenecks on the road to self-sufficiency. The analysis will reveal a common pattern: China is relatively strong in downstream segments closer to applications and end-products (such as OSAT), but faces severe challenges in upstream segments that determine the industry’s foundation (such as equipment, materials, and EDA). This imbalanced development posture defines the ceiling of its industrial security and future growth.

2.1 IC Design and EDA: The Industry’s Brain and Its Critical Bottleneck

IC Design

As the vanguard of the semiconductor industry, IC design determines a chip’s function, performance, and cost. While China’s sales revenue in this area has grown, the problem of high dependency on foreign core technologies remains prominent. Companies like Huawei’s HiSilicon and Unisoc have entered the global top ten, demonstrating strong design capabilities in specific areas (such as mobile communication processors).15 However, the overall ecosystem remains weak in high-end general-purpose chips like CPUs and GPUs.9

A deeper dependency lies in core intellectual property (IP). Currently, the vast majority of global chip designs are based on ARM or x86 architectures, with the former dominating the mobile and embedded sectors. Chinese IC design firms are highly reliant on ARM’s IP licensing, which exposes them to potential supply disruption risks.¹⁷ To counter this challenge, China is vigorously promoting the open-source RISC-V architecture, viewing it as a long-term strategic hedge aimed at building an alternative technology ecosystem not controlled by a single company.¹⁷

Electronic Design Automation (EDA)

If IC design is the “brain,” then EDA software is the “pen and paper” for thinking and designing. This area is one of the weakest and most passive links in China’s semiconductor industry chain. The global EDA market is highly monopolized by three U.S. companies: Synopsys (31% global market share), Cadence (30% global market share), and Mentor Graphics (now Siemens EDA, 13% global market share).18 These three giants collectively hold over 70% of the market share in China.20

U.S. export control policies have designated advanced EDA software as a core restricted item, directly limiting China’s ability to design chips for 7nm and below advanced processes.¹⁸ Although China has domestic EDA companies like Empyrean, their products are mainly focused on point tools for analog or mature digital circuits, and they have a huge gap with international giants in full-flow design capabilities for advanced processes.¹⁸ The “chokehold” problem in EDA fundamentally constrains the Chinese IC design industry’s advancement to higher technological levels.

2.2 Semiconductor Equipment: The Foundational Challenge of Domestic Substitution

Semiconductor equipment is the bedrock of the entire industry, and its technological level directly determines chip manufacturing capabilities. China’s self-sufficiency rate in this area is extremely low, with estimates from various reports ranging from 5% to 13.6%, indicating enormous room for domestic substitution.²²

• Lithography Machines: This is the most severe bottleneck China faces. Lithography is the most complex and precise step in chip manufacturing, and the global market, especially for Extreme Ultraviolet (EUV) technology used in advanced processes, is completely monopolized by the Dutch company ASML. Due to U.S. export controls, China cannot obtain EUV lithography machines, which fundamentally blocks its path to developing processes below 7nm. In the less advanced Deep Ultraviolet (DUV) field, China is also heavily reliant on imports. In 2023, domestically produced lithography systems accounted for only 1.2% of purchases by Chinese wafer fabs.²⁵

• Etching, Thin-Film Deposition, and Cleaning Equipment: In these areas, China’s domestic substitution has made more significant progress. Local companies represented by Naura and AMEC are rising rapidly. Naura’s domestic market share in etching and PVD equipment has reached 11% and 12%, respectively.²⁶ In cleaning equipment, the domestic substitution rate has reached 34%, and for photoresist stripping equipment, it is as high as 90%.²⁸ Progress in these areas provides key support for China’s capacity expansion in mature processes.

While U.S. sanctions have hindered China’s access to the most advanced equipment, they have also objectively created a large, protected domestic market for local equipment suppliers. Unable to purchase foreign equipment, Chinese wafer fabs have been forced to turn to domestic suppliers, providing an unprecedented opportunity for the validation, iteration, and market share growth of domestic equipment. This “internal circulation” is accelerating the maturation of the local equipment industry chain, albeit slowly and with many challenges.

2.3 Key Materials: The Uphill Battle for Photoresists and Silicon Wafers

Semiconductor materials are the “food” for chip manufacturing, and their purity and quality directly affect chip yield and performance. China has achieved a self-sufficiency rate of over 15% for materials required in mature processes, but remains heavily dependent on imports for high-end materials.²⁵

• Photoresists: This is another critical “chokehold” segment, especially for ArF (Argon Fluoride) and EUV photoresists used in advanced processes. The global high-end photoresist market is highly monopolized by Japanese companies like JSR, Tokyo Ohka Kogyo, and Shin-Etsu Chemical. The market penetration of domestic KrF (Krypton Fluoride) photoresists in China is only about 2%.²⁹ Although domestic companies like Kempur, BCPC, and Sinyang have made breakthroughs in mid-to-low-end photoresists such as G-line, I-line, and KrF, they are still in the R&D or customer validation stage for more advanced ArF and EUV photoresists and have not yet achieved large-scale supply capabilities.²⁹

• Silicon Wafers: As the substrate for chips, the production technology for large-size (12-inch) high-purity silicon wafers has extremely high barriers. China has made some progress in this area but still lags behind international giants like Shin-Etsu and SUMCO of Japan.

2.4 Wafer Fabrication (Foundry): The Divide Between Mature and Advanced Processes

Wafer fabrication is the core of the semiconductor industry chain and the most capital- and technology-intensive segment. Under external pressure, China’s foundry strategy shows a clear polarization.

• Mature Processes (≥28nm): This is where China is rapidly establishing a global advantage. Through massive state and local capital investment, China is aggressively expanding its mature process capacity. It is predicted that by 2030, mainland China’s market share in mature processes of 22nm and above will grow from 30% in 2023 to nearly 40%.²³ Led by SMIC and Hua Hong Semiconductor, local foundries are benefiting from strong domestic demand (especially for PMICs, IoT chips, and DDICs), leading to high capacity utilization rates. SMIC even became the world’s second-largest pure-play foundry in the first quarter of 2024.²³

• Advanced Processes (<14nm): This is the area hit hardest by U.S. sanctions. Due to the inability to obtain EUV lithography machines, China is at a fundamental disadvantage in the race for advanced processes of 7nm and below. SMIC successfully produced a 7nm-class Kirin 9000S chip for Huawei using existing DUV equipment through complex processes like multi-patterning, which is considered a remarkable engineering feat.³² However, the cost of this “detour” is high: its cost is 40-50% higher than TSMC’s equivalent process using EUV, and the yield is only about one-third.³³ This makes it commercially uncompetitive with international giants, existing only to meet specific domestic needs with state strategic support.

This strategic bifurcation is not a temporary measure but may be a deliberate asymmetric competition strategy. Unable to compete head-on at the technological frontier, China has chosen to build an overwhelming advantage in the mature process segment, which forms the economic foundation of the industry. Through potential economies of scale and price advantages, it may in the future make the world dependent on China’s “foundational chips,” thereby creating new strategic leverage.¹⁷

2.5 Packaging, Assembly, and Test (OSAT): A Position of Relative Strength

OSAT is the most mature and internationally competitive segment of China’s semiconductor industry chain. Leveraging China’s strong electronics manufacturing ecosystem and cost advantages, Chinese OSAT companies like JCET, TFME, and Huatian have become global leaders.³⁴ Mainland China currently holds over 30% of the world’s back-end packaging and testing capacity.⁸

As Moore’s Law slows, the importance of advanced packaging technologies (such as SiP, 2.5D/3D stacking, Chiplets, etc.) is growing, becoming a key path to continue improving chip performance. This provides new development opportunities for China’s OSAT companies. Leading firms like JCET are actively investing in high-density heterogeneous integration and other advanced packaging technologies. These technologies are crucial for high-performance AI chips and HPC, as they can integrate “chiplets” of different processes and functions to achieve performance beyond a single chip.³⁵ This is not only an area where China can leverage its OSAT strengths but also an important alternative path to bypass the advanced process lithography bottleneck and achieve system-level performance breakthroughs.

Table 2: China Semiconductor Self-Sufficiency Scorecard (2024 Estimates)

Value Chain Segment	Estimated Domestic Share (%)	Key Local Players	Key Foreign Players	Main Challenges & Bottlenecks	Data Source
EDA Software	< 5%	Empyrean	Synopsys, Cadence, Siemens EDA	Lack of full-flow tools, high dependency on US giants, severe export controls	¹⁸
Core IP	< 10%	-	ARM, Synopsys, Cadence	High dependency on ARM architecture, immature RISC-V ecosystem	¹⁷
Semiconductor Equipment	Overall ~14-25%	Naura, AMEC	ASML, AMAT, Lam Research, TEL	Overall technology lag, high foreign dependency	²⁴
Lithography	~ 1%	SMEE	ASML, Nikon, Canon	Complete lack of EUV, huge gap in DUV technology	²⁵
Etching Equipment	11% ~ 20%	Naura, AMEC	Lam Research, TEL, AMAT	High-end market still dominated by foreign firms	²⁶
Deposition Equipment	11% ~ 20%	Naura, Piotech	AMAT, TEL, Lam Research	Gradual breakthroughs in PVD/CVD, but gap remains in high-end equipment	²⁶
Semiconductor Materials	Overall ~15-20%	NSIG, Kempur	Shin-Etsu, SUMCO, JSR	Heavy reliance on imports for high-end products	²⁵
Large Silicon Wafers	~ 15%	NSIG, TZS	Shin-Etsu, SUMCO	Gap in capacity and quality for 12-inch wafers	²⁵
Advanced Photoresists	< 5%	Kempur, Sinyang, BCPC	JSR, TOK, Shin-Etsu	Complete reliance on imports for ArF and EUV photoresists, a core bottleneck	²⁹
Wafer Fabrication	-	SMIC, Hua Hong	TSMC, Samsung, Intel	Advanced processes restricted, rapid expansion in mature process capacity	²³
Packaging & Test (OSAT)	> 30%	JCET, TFME, Huatian	ASE, Amkor	Strong in traditional OSAT, rapidly catching up in advanced packaging	⁸

Chapter 3: The Geopolitical Crucible: U.S. Export Controls and Industrial Reshaping

Geopolitical factors, particularly the U.S.-led semiconductor export controls on China, have become the most critical variable shaping the landscape of China’s and the global semiconductor industry. This chapter will systematically analyze the evolution and core content of U.S. control policies and their profound impact on China’s industry, revealing how this external shock has become the decisive force in reshaping industrial strategy and global supply chains.

3.1 The Evolution of U.S. Policy: From “Small Yard, High Fence” to Comprehensive Controls

The U.S. strategy for semiconductor controls on China has undergone a gradual and systematic escalation, evolving from initial “precision strikes” against specific companies to a “comprehensive containment” of the entire industrial ecosystem.²¹

• Early Stage (Pre-2018): The U.S. strategy was primarily based on “limited exports,” mainly within the traditional framework of dual-use technology controls.

• “Small Yard, High Fence” Stage (2018-2022): Marked by sanctions against ZTE and Huawei, the U.S. began to construct a “Small Yard, High Fence” strategy. The core idea was to establish strict export barriers (“high fence”) in clearly defined key technology areas (“small yard,” i.e., semiconductors, AI), while maintaining openness in other areas. During this period, the focus of controls was on 5G communications and specific AI companies.²¹

• Comprehensive Control Stage (2022-Present): In October 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a series of comprehensive new export control regulations, marking a fundamental shift in its strategy. The goal was no longer to “maintain a relative advantage” but to “maintain as large of a lead as possible,” aiming to systematically slow down or even block China’s development in advanced computing and artificial intelligence.²¹

This new stage of control measures exhibits several key features:

1. From End-Product to Source: The scope of control expanded from final chip products upstream to all elements required to manufacture them, including semiconductor equipment, EDA software, key components, and even downstream to services like providing computing power leasing using controlled chips.²¹

2. From Unilateral to Multilateral: The U.S. actively lobbied its allies, successfully bringing the Netherlands (home to ASML) and Japan (a powerhouse in equipment and materials) into its control system, forming a “multilateral encirclement” of technology blockade against China.²¹

3. Dynamic Updates and Loopholes Plugging: The control rules are designed to be “dynamic,” with the Commerce Department stating they will be updated at least annually to plug potential loopholes and adjust control parameters based on technological developments.²¹

3.2 Impact Analysis: Choking Off Advanced Technology

The core objective of U.S. export controls is to precisely target China’s ability to acquire and produce two types of key technologies: advanced logic chips for high-performance computing (typically defined as 14/16nm and below), and high-end AI chips for training artificial intelligence models.³⁹

• Blockade on Advanced Processes: By prohibiting the export of EUV lithography machines and related technologies to China and restricting the use of DUV lithography machines in advanced processes, the U.S. has effectively cut off China’s path to industrializing processes of 7nm and below. Furthermore, through the extraterritorial jurisdiction of the “Foreign Direct Product Rule” (FDPR), the U.S. has prevented foreign companies like TSMC that use American technology from manufacturing advanced process chips for Chinese entities like Huawei’s HiSilicon.³⁹ This directly led to the “supply cutoff” of Huawei’s high-end Kirin chips and forced domestic manufacturers like SMIC to explore non-EUV alternative paths under extremely low economic and technical efficiency.

• Restrictions on AI Computing Power: The control measures set clear performance thresholds (such as high-bandwidth memory, processing performance, etc.), and any AI chips exceeding these thresholds (like Nvidia’s A100/H100) cannot be exported to China. This has forced companies like Nvidia to introduce significantly downgraded “special supply” chips (like the H20) to circumvent the controls.³⁸ However, the U.S. government continues to tighten control standards, and Nvidia has stated that it will not release subsequent chips based on the Hopper architecture for the Chinese market in the future, further shrinking China’s access to high-end AI computing power.³⁸

3.3 Global Ripple Effects: A Bifurcated World

The impact of the U.S. comprehensive control policy on China extends far beyond the two countries, profoundly reshaping the structure of the global semiconductor supply chain and pushing the world towards a “bifurcated” future.

For decades, the global semiconductor industry was built on a highly specialized, globally integrated supply chain that maximized efficiency. The U.S. excelled in design and IP, Japan in materials, Europe in equipment, South Korea and Taiwan in manufacturing, and mainland China in OSAT and market. The current control policies are breaking this pattern.

International companies are forced to choose between the U.S. and Chinese markets, and supply chains are beginning to reorganize along geopolitical lines. On one hand, leading global companies are reducing their long-term reliance on the Chinese market and shifting production and investment to “friend-shored” regions like the U.S., Europe, and Southeast Asia.⁸ On the other hand, China is accelerating the construction of a self-sufficient “red supply chain” independent of the U.S. technology system with unprecedented determination and resources.

The cost of this bifurcation is high. It sacrifices the efficiency brought by globalization, increases global production costs, and may lead to the fragmentation of technology standards. For U.S. tech companies, losing the massive Chinese market means losing a significant source of revenue that could have been reinvested in R&D, potentially weakening their own innovation capabilities and global competitiveness in the long run. For example, Synopsys and Cadence derive 16% and 12% of their total revenue from China, respectively, and losing this market would have a significant financial impact.¹⁸

Ultimately, the world may face two parallel semiconductor ecosystems: one led by the U.S. and its allies, continuing to push the technological frontier; and another centered on China, developing an independent set of technology standards and supply chains supported by its huge domestic market. These two ecosystems will engage in fierce competition on a global scale.

Chapter 4: China’s Strategic Response: Policy, Capital, and National Champions

Facing a rapidly changing external environment, China has adopted a systematic response strategy led by state will. The core of this strategy is to accelerate the cultivation of a domestic industry chain through large-scale capital injection and top-level policy design, aiming to achieve “autonomy and control” in key technological areas. This chapter will delve into the operational model of the “Big Fund,” the objectives of national industrial policy, and assess the actual progress on the path to self-sufficiency.

4.1 The “Big Fund”: Strategic Focus of the Third Phase’s Hundred-Billion Capital

The National Integrated Circuit Industry Investment Fund (commonly known as the “Big Fund”) is the core financial tool for China’s promotion of the semiconductor industry. Following the first phase (RMB 98.72 billion) and the second phase (RMB 204.15 billion), the third phase, established in 2024, is of an unprecedented scale, with a registered capital of RMB 344 billion, exceeding the sum of the first two phases.¹⁰

The establishment of the third phase of the Big Fund marks a significant upgrade in China’s semiconductor support strategy, exhibiting several notable features:

1. “Whole-of-Nation” Financial Mobilization: Unlike the first two phases, which were mainly funded by the Ministry of Finance and policy-oriented institutions like China Development Bank Capital, the shareholder list of the third phase prominently features the six major state-owned commercial banks, including ICBC, CCB, and Bank of China, contributing a total of RMB 114 billion, accounting for 33.14% of the total share capital.¹⁰ The deep involvement of commercial banks indicates that this is no longer just an industrial investment but has been elevated to a strategic task at the level of the national financial system. This model can provide more patient and larger-scale capital than market-oriented funds, supporting long-term, high-risk, but strategically crucial basic research and core technology projects.

2. From “Filling Gaps” to “Full-Chain” Support: If the investment focus of the first and second phases was on solving the most severe “chokehold” in the manufacturing segment (with a combined investment share of nearly 70%), the goal of the third phase is more ambitious, aiming for systematic support for the “entire integrated circuit industry chain”.¹⁰ This means that investment will be more evenly distributed across the entire ecosystem, including semiconductor equipment, key materials, EDA software, and advanced packaging. This shift reflects the leadership’s recognition that breakthroughs in the semiconductor industry require the synergistic progress of the entire ecosystem, not just single-point breakthroughs.

3. Focus on Emerging Strategic Areas: In addition to continuing the key support for equipment and materials, the market widely expects the third phase of the Big Fund to focus on two emerging strategic areas. One is computing and memory chips related to AI and the digital economy, especially high-value-added products like High-Bandwidth Memory (HBM).¹⁰ The other is third-generation semiconductors represented by Silicon Carbide (SiC) and Gallium Nitride (GaN), which is a new strategic track where China hopes to achieve “lane-changing to overtake”.⁴⁰

4.2 Cultivating a Domestic Ecosystem: The Continuation of “Made in China 2025”

The capital operation of the Big Fund is a concrete means to achieve the broader national strategy of “Made in China 2025.” This strategy, proposed in 2015, aims to comprehensively upgrade China’s manufacturing industry, with integrated circuits listed as a core basic industry requiring key breakthroughs.¹¹

The core objective of the strategy is to achieve a high degree of self-sufficiency in the semiconductor industry, with initial targets of 40% self-sufficiency by 2020 and 70% by 2025.⁴² To achieve this goal, the Chinese government has not only provided funding but also fostered a domestic-circulating industrial ecosystem through tax incentives, talent introduction programs, and policies encouraging collaboration between downstream device manufacturers (such as mobile phone and automotive companies) and upstream chip companies.³⁰

Under the pressure of external sanctions, the cultivation of this internal ecosystem has been passively accelerated. Unable to freely purchase from the international market, domestic wafer fabs and chip design companies have been forced to turn to local equipment and material suppliers. This “passive” cooperation, while possibly sacrificing efficiency and yield in the initial stages, has provided invaluable mass production verification opportunities and iterative improvement feedback for domestic equipment and materials, objectively acting as an incubator and shortening the process of domestic substitution.

4.3 Assessing the Progress of Self-Sufficiency: The Gap Between Goals and Reality

Despite massive investment, the road to semiconductor self-sufficiency is far more difficult than anticipated.

• Current Self-Sufficiency Rate: The initial goal of “achieving 70% self-sufficiency by 2025” now seems unattainable.¹¹ According to various institutional estimates, China’s overall chip self-sufficiency rate in 2024 is between 20% and 35%.⁸ Although significant progress has been made in certain sub-sectors (such as some mature processes and OSAT), the gap in core technologies and high-end products remains huge.

• Future Outlook: A more realistic forecast is that with continued policy and capital promotion, China’s chip self-sufficiency rate is expected to increase to 50-60% by 2030.⁸ This means that by then, China will be able to meet most of its domestic demand for mature process chips and achieve “de-Americanized” domestic substitution in some advanced areas. However, at the most cutting-edge technological frontier, a technology gap of 2 to 3 generations with the world’s leading level may still persist.

In summary, China’s strategic response is a protracted war backed by massive capital and national will. Its goal is not to comprehensively surpass its rivals in the short term, but to first ensure the survival and operation of its domestic industry chain under external blockade, then gradually climb up to core upstream technologies, and ultimately establish a resilient semiconductor industrial ecosystem that can run parallel to the outside world.

Chapter 5: Industry Titans: A Deep Dive into China’s Semiconductor National Champions

This chapter will focus on several core enterprises that form the backbone of China’s semiconductor industry. They are not only market leaders in their respective fields but also members of the “national team,” tasked with carrying out national strategies and driving technological breakthroughs. A deep analysis of these companies provides a clearer insight into the strength, strategic intent, and future direction of China’s semiconductor industry.

5.1 Huawei (HiSilicon): Resilience and Reinvention in the AI Era

Under U.S. sanctions, the experience of Huawei’s HiSilicon is a microcosm of the predicament and determination of China’s semiconductor industry. Its development path clearly shows the strategic transformation of a tech giant after its core supply chain was cut off.

• Strategic Shift: After being unable to produce its advanced Kirin series mobile SoCs through top foundries like TSMC, Huawei did not abandon chip design. Instead, it shifted HiSilicon’s strategic focus from consumer electronics to the enterprise and artificial intelligence sectors.⁴⁵ Its core product lines transformed into the “Ascend” series of AI accelerators and the “Kunpeng” series of server CPUs, aiming to provide an autonomous and controllable computing foundation for China’s vast data center and AI markets.¹⁴

• R&D-Driven Future: Huawei’s confidence in its transformation stems from its staggering R&D investment. In 2024, the company’s R&D expenditure reached RMB 179.7 billion, accounting for 20.8% of its annual revenue, with a cumulative R&D investment of over RMB 1.2 trillion in the past decade.⁴⁷ This “pressure-intensive investment” ensures its continuous innovation capabilities in areas like AI chip architecture, algorithms, and system software. The company’s long-term strategies, such as the “Tianshui Plan” and “Dishui Plan,” aim to build a future-oriented AI computing advantage from the root technologies.⁴⁷

• Leader of the Domestic Ecosystem: Huawei is not just a chip design company; it is the core driver and system integrator of the entire domestic semiconductor ecosystem. The design requirements of its Ascend 910B/C and other AI chips have directly driven the process development and capacity ramp-up of SMIC’s 7nm (N+2) and other advanced nodes, making it SMIC’s most critical customer.³³ By directing demand and orders to domestic equipment, materials, and OSAT vendors, Huawei is acting as a “chain master,” powerfully pulling the entire “red supply chain” towards coordinated development.

5.2 SMIC: Exploring a Non-EUV Path to Advanced Processes Under Sanctions

As mainland China’s largest and most technologically advanced wafer foundry, Semiconductor Manufacturing International Corporation (SMIC) is the central pillar for the nation’s goal of chip manufacturing self-sufficiency. Its development strategy exhibits a clear duality: aggressive expansion in mature processes and arduous breakthroughs in advanced processes.

• Dual-Track Strategy: SMIC’s business is clearly divided into two fronts. The first is its core global competitiveness—mature processes (28nm and above). Driven by strong domestic demand for Power Management ICs (PMICs), Internet of Things (IoT) chips, Image Sensors (CIS), and Display Driver ICs (DDICs), SMIC’s mature process capacity is in high demand, with a capacity utilization rate of 92.5%, and 84% of its revenue coming from the mainland China market.³¹ This provides it with a stable source of cash flow and profit.

• Technological Breakthrough of the N+2 Process: The second front is challenging the limits of advanced processes without EUV lithography machines. Using existing DUV machines, SMIC successfully developed the 7nm-level “N+2” process through extremely complex techniques like multi-patterning and mass-produced the Kirin 9000S chip for Huawei.³² This achievement shocked the industry, demonstrating China’s engineering capability to achieve technological breakthroughs under specific conditions. It is reported that the company is planning to complete the development of a 5nm process by 2025 based on a similar technological path.³³

• High Cost and Strategic Significance: However, the cost of this non-EUV path is enormous. Its manufacturing cost is 40-50% higher than TSMC’s equivalent process using EUV, and both yield and performance are significantly inferior.³³ This means it lacks global commercial competitiveness, and its existence is more for meeting national strategic needs. Despite numerous challenges, SMIC continues to expand its advanced node capacity, which is expected to reach 45,000 wafers per month by the end of 2025, demonstrating the state’s firm long-term support.⁴⁸

5.3 YMTC: A Global Competitor in 3D NAND Memory Technology

Yangtze Memory Technologies Corp. (YMTC) is one of the most globally competitive examples in China’s semiconductor industry, having achieved rapid catch-up with international giants in the technology-intensive 3D NAND flash memory field.

• Core Technology Advantage: Xtacking Architecture: The key to YMTC’s success lies in its proprietary Xtacking® architecture. This technology processes the memory array and peripheral logic on two separate wafers and then stacks them together using hybrid bonding. This innovative architecture allows for independent optimization of the design and manufacturing of both parts, thereby achieving higher storage density and I/O performance without increasing process complexity.⁵¹

• Technology on Par with International Giants: Leveraging the advantages of the Xtacking architecture, YMTC has successfully mass-produced 232-layer 3D NAND products, a technological level that is largely in sync with top international players like Samsung, SK Hynix, and Micron.⁵¹ Its technological strength has been widely recognized in the industry. There are even reports that market leader Samsung Electronics has signed a patent licensing agreement with YMTC for next-generation NAND “hybrid bonding” technology, a rare case of a Chinese company exporting core technology to a global giant.⁵²

• Market Position and Application: YMTC’s products have successfully entered the mainstream consumer electronics supply chain, being used and validated in large quantities in smartphones from domestic brands like Xiaomi and Transsion.⁵¹ As its production capacity and technological maturity continue to improve, YMTC is steadily expanding its global market share, becoming a significant force in breaking the monopoly of Korean, American, and Japanese companies in the NAND flash market.

5.4 JCET: A Leader in Advanced Packaging and Heterogeneous Integration

In the post-Moore era, advanced packaging technology has become key to continuing the growth of chip performance. As a leading global OSAT company, JCET is at the center of this technological transformation.

• Market Leadership and Technology Portfolio: JCET is one of the world’s top OSAT vendors, offering a full range of technology services from traditional leadframe packages to advanced wafer-level packaging.³⁴ Its technology portfolio includes System-in-Package (SiP), Wafer-Level Chip-Scale Package (WLCSP), Fan-Out, and the XDFOI™ series for Chiplets.³⁵

• Strategic Value of Heterogeneous Integration: JCET’s core competitiveness lies in its high-density heterogeneous integration capabilities. As the difficulty and cost of improving single-chip performance increase, integrating multiple “chiplets” with different functions and manufactured by different processes onto a single substrate via advanced packaging has become a mainstream solution for high-performance computing. JCET’s XDFOI™ technology is designed for this purpose, providing high-density, low-latency interconnect solutions for high-end chips like CPUs, GPUs, and AI accelerators.³⁵

• Enabling Key Application Areas: The company’s advanced packaging technologies are widely used in high-growth areas such as AI, HPC, 5G communications, and automotive electronics. For example, the company has successfully shipped integrated packaging products for a multi-chip system at the 4nm node for an international client and provides advanced packaging solutions for 4D millimeter-wave radar required for L3 and above autonomous driving.³⁵ In the context of China seeking to bypass the advanced process lithography bottleneck, JCET’s advanced packaging capabilities are of extremely important strategic significance, offering an effective path to compensate for single-chip manufacturing shortcomings through system-level innovation.

5.5 NAURA: The Rise of a Domestic Equipment Champion

Naura Technology Group is the leading company in China’s semiconductor equipment industry and one of the most critical links in the process of achieving self-sufficiency across the entire semiconductor industry chain. Its rapid growth is a direct reflection of the domestic substitution trend.

• Biggest Beneficiary of Sanctions: As U.S. export controls on China have tightened, the channels for domestic wafer fabs to purchase foreign equipment have been blocked, creating a huge market gap for domestic equipment suppliers like Naura. The company’s performance has consequently seen explosive growth, with its net profit attributable to the parent company growing at a compound annual growth rate (CAGR) of 88% between 2019 and 2023.²⁶ The semiconductor equipment business has become its absolute core, accounting for over 80% of its revenue.²⁶

• Product Layout and Market Share: As China’s most comprehensive platform-type equipment company, Naura’s products cover core chip manufacturing processes such as etching, thin-film deposition (PVD, CVD), cleaning, and thermal processing (furnaces).⁵⁴ In the key areas of etching and thin-film deposition equipment, the company has achieved a domestic market share of about 11% in each, and in PVD equipment, this figure is 12%.²⁶ This marks a breakthrough for China from “0” to “1” in some core equipment and the beginning of a market share expansion phase.

• Financial Performance and Future Potential: Strong market demand and continuously improving product competitiveness have significantly enhanced Naura’s profitability, with the net profit margin of its semiconductor equipment business increasing from 3% in 2019 to nearly 18% in 2023.²⁶ With a new round of capacity expansion by domestic wafer fabs and further increases in domestic substitution requirements, Naura, as the leading domestic equipment supplier, still has huge growth potential.⁵⁵

Table 3: Comparative Analysis of Key Chinese Semiconductor Companies

Company	Main Business Segment	Core Tech/Product	Market Position & Role	Strategic Importance for Self-Sufficiency	Data Source
Huawei (HiSilicon)	IC Design	Ascend AI Chips, Kunpeng Server CPUs	China’s AI chip design leader, “chain master” of the domestic ecosystem	Very High: Defines high-end chip demand, drives tech upgrades across the entire domestic supply chain.	¹⁴
SMIC	Wafer Fabrication	Mature Processes (28nm+), N+2 (7nm-class) DUV Process	Top 3 global pure-play foundry, most advanced foundry in mainland China	Very High: Core platform for national chip manufacturing self-sufficiency, tasked with advanced process R&D.	²³
YMTC	Memory (IDM)	Xtacking® 3D NAND Architecture, 232-layer Flash	Major player in the global 3D NAND market, technology on par with global giants	High: Achieves self-reliance in the strategic commodity of memory, breaking foreign monopoly.	⁵¹
JCET	Packaging & Test	XDFOI™ Chiplet Technology, System-in-Package (SiP)	Leading global OSAT, leader of China’s OSAT industry	High: Key to improving system performance in the post-Moore era, an important path to bypass lithography bottlenecks.	³⁴
NAURA	Semiconductor Equipment	Etcher, PVD, CVD, Furnace, Cleaner	China’s largest and most comprehensive platform-type equipment company	Very High: The cornerstone of upstream self-sufficiency, directly determines the localization level of chip manufacturing.	²⁶

Chapter 6: New Frontiers: Charting China’s Future Growth Trajectory

While addressing current challenges, China’s semiconductor industry is also actively positioning itself for the future, aiming to seize opportunities in emerging technological fields to leap from “catching up” to “leading.” This chapter will focus on analyzing three key frontier areas—AI chips, third-generation semiconductors, and advanced packaging—which will collectively shape the next phase of development for China’s semiconductor industry.

6.1 The AI Chip Arms Race: The Rise of Domestic GPUs and Accelerators

The wave of artificial intelligence is propelling the global semiconductor industry towards a trillion-dollar market, with AI chips at the core of this transformation.⁵⁶ Against the backdrop of strict U.S. export controls on high-end GPUs from companies like Nvidia, developing indigenous AI chips has evolved from a commercial choice to a national strategic imperative for China.

• Huge Market Demand and a Window for Domestic Substitution: China is one of the world’s largest AI application markets, with massive data and rich application scenarios, providing a vast playground for AI chips.⁵⁶ The restriction on external supplies has created a huge substitution space for local AI chips. According to TrendForce, by 2025, the share of domestic chip suppliers (such as Huawei) in China’s AI server market is expected to increase from about 10% in 2024 to 40%, nearly on par with foreign-sourced chips.³⁸

• Building a Local Ecosystem: An ecosystem centered around autonomous AI chips is being built at an accelerated pace. Huawei’s Ascend series is the current frontrunner, with its performance in certain metrics comparable to Nvidia’s downgraded products.⁴⁹ Meanwhile, a group of AI chip startups, including Cambricon, Biren Technology, and Moore Threads, are also actively developing their own GPU and AI accelerator products.⁴⁹ The ultimate goal of this race is to build a fully autonomous and controllable AI technology stack—from hardware chips, compilers, and deep learning frameworks to upper-level application software—to break the dependency on Nvidia’s CUDA ecosystem.

6.2 Third-Generation Semiconductors (SiC & GaN): A Strategic Opportunity to Leapfrog

Unlike first-generation semiconductors represented by silicon (Si), third-generation wide-bandgap semiconductors, represented by Silicon Carbide (SiC) and Gallium Nitride (GaN), offer unparalleled performance advantages in high-voltage, high-frequency, high-temperature, and high-power scenarios.⁵⁸ This makes them core materials for supporting new energy vehicles, 5G communications, photovoltaic inverters, and next-generation power electronics.

• Seizing the Opportunity in an Emerging Track: Third-generation semiconductors are a globally emerging industry where all countries are roughly at the same starting line, providing a rare “lane-changing” opportunity for China. The Chinese government has included the development of third-generation semiconductors in national strategies like the “14th Five-Year Plan” and plans to provide strong support in research, financing, and application to achieve industrial self-sufficiency.⁵⁸

• Advantage Driven by Downstream Markets: China has a world-leading scale and industry chain in the main application markets for third-generation semiconductors—new energy vehicles and 5G communications. The massive domestic market demand provides a strong pull for the R&D and commercialization of local SiC and GaN devices. For example, using SiC power modules in new energy vehicles can significantly improve the efficiency of the electric drive system and increase driving range. As the world’s largest new energy vehicle market, China naturally becomes the best testing ground and incubator for the SiC industry.⁵⁹

• Current Status and Challenges: Currently, China has established an industrial layout in SiC substrate materials, epitaxial growth, and device manufacturing. However, compared to international leading companies (like Wolfspeed, Infineon), there is still a gap in material quality, device reliability, and cost control.⁵⁹ In addition, issues such as insufficient industry chain collaboration and a disconnect between research and industry also constrain development.⁶⁰ Nevertheless, with clear policy support and huge market potential, third-generation semiconductors are undoubtedly one of the most promising areas for China’s semiconductor industry to achieve global leadership.

6.3 Advanced Packaging and Chiplets: A Paradigm Shift in the Post-Moore Era

As the traditional scaling of transistor size (Moore’s Law) approaches its physical limits, the performance benefits diminish while costs skyrocket. Against this backdrop, integrating multiple “chiplets” into a high-performance system through advanced packaging technology is becoming a key technological path to continue the development of the semiconductor industry.

• A Pragmatic Choice to Bypass the Lithography Bottleneck: For China, which is restricted in advanced process lithography technology, the Chiplet architecture has special strategic significance. It offers a “break it down and build it back up” approach: instead of struggling to manufacture a huge monolithic System-on-Chip (SoC) using a 5nm or 3nm process, different functional modules (like CPU, GPU, I/O) can be manufactured as separate Chiplets using the most suitable and highest-yield process (which could be 14nm, 28nm, or other mature processes). These are then interconnected at high speed using 2.5D/3D advanced packaging technologies.³⁵

• Leveraging China’s Existing Strengths: This path happens to play to China’s relative strength in the OSAT field. Local OSAT leaders, represented by JCET, are investing heavily in high-density heterogeneous integration technologies that support Chiplets and have already entered stable mass production.³⁵

• Driving Industrial Change: Chiplet is not just a technology but also a transformation of the business model. It is expected to foster an open, modular chip market where design companies can quickly build customized chip systems by purchasing standardized Chiplets from different suppliers, much like building with blocks. This provides new development opportunities for China’s IC design companies.

In summary, China’s layout in emerging fields reflects a highly strategic combination of moves. Developing AI chips is a “defensive” necessity to counter external blockades; betting on third-generation semiconductors is an “offensive” move to compete for future dominance by leveraging downstream market advantages; and promoting advanced packaging and Chiplets is a “flexible” strategy to pragmatically enhance system performance by bypassing current technological bottlenecks. These three fronts together form the future blueprint for China’s semiconductor industry’s quest for a breakthrough.

Chapter 7: Strategic Outlook and Concluding Analysis

This report, through a systematic review and in-depth analysis of the macro market, value chain, geopolitical environment, national strategy, and key enterprises of China’s semiconductor industry, aims to provide a comprehensive framework for understanding this complex and critical field. This chapter will synthesize all the preceding analyses, distill the core challenges and opportunities, forecast the industry’s development path for the next 5 to 10 years, and ultimately form a conclusive judgment on the new global semiconductor landscape.

7.1 A Comprehensive Assessment of Core Challenges and Opportunities

The future of China’s semiconductor industry will be shaped by the intense collision of challenges and opportunities.

Core Challenges:

1. Persistent Blockade on Key Technology Nodes: In the foreseeable future, China’s access to EUV lithography machines, advanced EDA software, and cutting-edge materials will remain strictly limited. This is a fundamental obstacle that is difficult to overcome in the field of advanced logic chips.

2. High Cost and Inefficiency of the Non-EUV Path: Although SMIC has demonstrated the possibility of producing 7nm-class chips using DUV technology, its high cost and low yield make this path economically unsustainable. It can only serve as a “cost-is-no-object” solution to meet specific strategic needs.

3. Shortcomings in Basic Research and Talent: The foundation of the semiconductor industry lies in deep basic research in materials science, physics, and experienced engineering talent. China’s long-term accumulation in these areas is still insufficient, and the conversion chain from research to industry is not smooth enough.⁶⁰

4. Normalization of Geopolitical Risks: The export control policies of the U.S. and its allies will be long-term and dynamic, meaning that China’s semiconductor industry will continue to operate in a highly uncertain and stressful external environment.

Strategic Opportunities:

1. A Huge, Protected Domestic Market: External sanctions have objectively created a large “strategic incubator” for local enterprises, shielded from direct competition with international giants. From equipment and materials to chip design, domestic suppliers have gained unprecedented market access and trial-and-error opportunities.

2. Massive Capital Support under a “Whole-of-Nation” System: The national-level capital injection represented by the third phase of the “Big Fund” provides the industry with long-term, stable, and almost market-cycle-proof financial support, enabling it to conduct high-risk, long-cycle core technology R&D.

3. Advantageous Position in Mature Processes and Packaging: China is expected to establish a globally dominant position in the mature process segment, which forms the economic foundation of the industry, and to play a leading role in advanced packaging—a key technology in the post-Moore era.

4. Potential for “Leapfrogging” in New Tracks: In emerging fields like third-generation semiconductors, the global technology and industrial landscape has not yet solidified. Leveraging its vast downstream application markets (such as new energy vehicles), China has the opportunity to build a complete industrial chain advantage from materials to applications.

7.2 Scenario Forecast for China’s Semiconductor Industry (2025-2030)

Based on the analysis of the above challenges and opportunities, the future development of China’s semiconductor industry may present the following three scenarios:

• Scenario A (Baseline Scenario): Resilient Parallel Development
  In this scenario, China basically achieves the revised goals of “Made in China 2025,” reaching a chip self-sufficiency rate of about 50-60% by 2030.8 Specific manifestations include:

  • In the mature process (28nm and above) segment, China becomes the absolute dominant player in the global market through massive capacity expansion, with a market share exceeding 40%.²³

  • In advanced processes, through a combination of DUV multi-patterning and advanced packaging, it can provide “usable” but high-cost solutions for high-end domestic needs (such as AI training, supercomputing), maintaining a stable technology gap of 2-3 generations with the world’s frontier.

  • In equipment and materials, it achieves full domestic production of low-to-mid-end products but still relies on (or is limited by) external sources for a few core bottlenecks like lithography machines and high-end photoresists.

  • In third-generation semiconductors and advanced packaging, it becomes a strong competitor in the global market.

• Scenario B (Accelerated Breakthrough Scenario): Asymmetric Catch-up
  The trigger for this scenario would be a non-linear breakthrough in one or two key bottleneck technologies. For example, domestically produced immersion DUV lithography machines achieve mass production with high yield, or disruptive innovations are made in new materials or Chiplet interconnect standards. This would lead to:

  • Self-sufficiency rate exceeding 60% by 2030.

  • Through the combination of “advanced process (DUV) + advanced packaging,” the comprehensive performance of its high-end chips significantly narrows the gap with the international frontier, even reaching parity in some specific applications.

  • In key areas like AI chips, it completely breaks free from reliance on external supplies and begins to form a competitive autonomous ecosystem.

• Scenario C (Bottleneck Solidification Scenario): High-Cost Internal Circulation
  In this scenario, the technical and economic bottlenecks of the non-EUV path prove difficult to overcome, with yields failing to improve effectively and costs remaining high. Meanwhile, the controls from the U.S. and its allies are further tightened. This would lead to:

  • Self-sufficiency rate stagnating below 40% by 2030.

  • China forms a large “internal circulation” industrial system mainly serving the domestic market, but lacking competitiveness in the global market.

  • The technology gap with the international frontier widens further, especially in general-purpose computing and AI. Industrial development becomes highly dependent on continuous massive state subsidies, falling into a dilemma of “huge investment, limited output.”

Currently, Scenario A (Baseline Scenario) is the most likely outcome.

7.3 Conclusion: The Advent of a New, Bifurcated Global Semiconductor Order

Regardless of the final scenario, one core conclusion is already clear: the era of a globally integrated semiconductor supply chain, driven by efficiency for the past three decades, has ended. We are witnessing the birth of a new global semiconductor order, with “Bifurcation” as its most prominent feature.

The future will be a world of two coexisting and competing major ecosystems:

1. An ecosystem led by the United States and its technology allies (such as Japan, South Korea, the Netherlands, and Taiwan). It will continue to control the most advanced manufacturing technology (EUV) and lead the global direction of technology standards and innovation in areas like general-purpose computing, artificial intelligence, and mobile communications.

2. An autonomous and controllable ecosystem with China at its core. Driven by its huge domestic market and national will, it will establish a relatively independent technology system. This system will dominate the mature process segment and explore alternative paths to high performance through asymmetric routes like advanced packaging and third-generation semiconductors.

These two ecosystems will not be completely isolated. They will compete fiercely in the global market, especially in mature technology products. At the same time, they may still have complex, interdependent relationships in certain segments. For all global players, understanding and adapting to this coming “bifurcated” new order will be the biggest strategic challenge of the next decade. China’s semiconductor industry is undergoing an unprecedented self-reinvention, both passively and actively, in the crucible forged by this profound global transformation.

Table 4: Key Milestones and Forecasts for China’s Semiconductor Industry (2025-2030)

Year	Key Tech/Industry Milestone Forecast	Forecasted Self-Sufficiency Rate (%)	Market Dynamics & Trends	Geopolitical Outlook
2025	- SMIC’s 5nm DUV process enters risk production ³³	- Domestic AI chips reach 40% market share in China 38	- 3rd-gen semiconductors begin large-scale application in NEVs	30% - 35%	- AI penetrates endpoints like phones, PCs, driving a new replacement cycle ¹²	- Global memory market enters a strong recovery period	- U.S. export controls become normalized with annual updates ²¹	- “Friend-shoring” of supply chains accelerates
2027	- Domestically produced immersion DUV lithography machines achieve small-batch commercialization - Chiplet commercial ecosystem begins to form, with domestic products based on open standards - Domestic KrF photoresists achieve mainstream supply	40% - 45%	- Risk of overcapacity in mature processes emerges, potentially triggering a global price war - China becomes a major supplier in 3rd-gen semiconductor materials (SiC)	- U.S.-China tech competition enters a stalemate phase - The “dual ecosystem” structure of the global semiconductor supply chain is largely established
2030	- Advanced packaging becomes a mainstream performance-enhancing path parallel to advanced processes - Domestic CPUs/GPUs based on RISC-V architecture are deployed at scale in specific areas (e.g., servers, IoT) - Breakthroughs in domestic ArF photoresists	50% - 60%	- Global semiconductor market size exceeds $1 trillion ⁶	- China dominates the global mature process market, holding over 40% of capacity 23	- The two parallel semiconductor technology ecosystems engage in full-scale global competition - Increased risk of technology standard fragmentation

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