More mature chip units to come up

Chinese chipmakers are increasing efforts to manufacture mature chips in order to prepare for the expected recovery in the global semiconductor sector this year, industry experts said on Monday.

Another goal is to reduce reliance on imported chips amid US export controls, they said.

Most of their new production capacity will focus on mature chips, mostly 28 nanometers and above. Although these are not at the forefront of current innovations, such chips are used in a wide range of applications, from home appliances to automobiles, experts said.

They made the comments after the latest Customs data showed China's imports of integrated circuits or ICs fell in 2023 as domestic production capacity increased.

China imported 479.5 billion units of ICs worth $349.4 billion last year, down 11 percent in scale and down 15 percent in value.

By contrast, Chinese chipmakers' production capacity may have increased 12 percent to 7.6 million wafers per month last year, global chip consultancy SEMI said in a report.

"The sharp decline in China's IC imports was mainly due to sluggish global market demand," said Sheng Linghai, an analyst from market consultancy Gartner.

Several market consultancies, including IDC, predicted that overall IC sales will recover this year and are expected to drive global demand.

Industry experts, however, said that amid global geopolitical uncertainties, Chinese chipmakers have been beefing up local production capacity to not only meet soaring domestic demand for mature chips, but also accumulate mature technologies and then slowly grow toward advanced chip technologies.

Guo Junli, a research director at IDC Asia-Pacific, said in an interview that China urgently needs to improve supply capabilities given the huge domestic demand for semiconductors. Much of that demand is from fields like electric vehicles, industrial intelligence and artificial intelligence.

"On the supply side, China faces international policy risks and restrictions and is in urgent need of a supply chain that is free of such pressures," Guo said.

This year, Chinese chipmakers are forecast to make 18 projects operational. They are also expected to lead the expansion of the global semiconductor industry, SEMI said.

After examining the plans of 48 Chinese chipmakers, analysts at British bank Barclays said China could expand its chip production capacity by 60 percent over the next three years.

"Local players are still underappreciated," analysts Joseph Zhou and Simon Coles wrote in the note. "There are materially more local semiconductor manufacturers and fabs (fabrication units or semiconductor production facilities) in China than suggested by mainstream industry sources."

IC research company Trend-Force said in a recent note that China has 44 semiconductor wafer fabs in operation and a further 22 are under construction. By the end of this year, there could be 32 new Chinese fabs for mature chips in all.

Such expected massive expansion, which has alarmed the United States and the European Union, will likely see China's global share of mature process capacity reach 39 percent by 2027, up from 31 percent in 2023, with room for further growth if equipment procurement proceeds smoothly, TrendForce said.