Two Separate Semiconductor Ecosystems Led by China and the U.S. Respectively...

(Image credit: TMTPost AGI Editor Lin Zhijia)

TMTPOST -- The possibility of a bifurcated global semiconductor ecosystem, led by China and the United States, appears increasingly plausible amid intensifying geopolitical tensions, warned Wei Shaojun, Chairman of the Integrated Circuit Design Branch of the China Semiconductor Industry Association and a professor at Tsinghua University.

However, such a division could be detrimental to all parties involved, potentially leading to losses on both sides, Wei added.

Speaking at the SEMICON China 2025 Semiconductor Exhibition during the Global Semiconductor Industry Strategic Summit and SEMI Industry Innovation Investment Forum (SIIP China), Wei characterized China's chip industry as being in a "peculiar" state while the international landscape remains "full of uncertainties and complexities."

Despite geopolitical pressures, Wei emphasized that no single country or company can achieve complete self-reliance in semiconductor production, underscoring the necessity of global collaboration.

Despite headwinds, the semiconductor industry is showing signs of recovery following the downturn of 2023. According to the World Semiconductor Trade Statistics (WSTS), global chip revenues are projected to reach $626.8 billion in 2024, a 19% year-on-year increase driven by demand for artificial intelligence (AI) and high-bandwidth memory (HBM). China's chip industry is expected to generate sales revenue of 1.43 trillion yuan ($198 billion) in 2024, up 16.7% from the previous year, while production hit 451.4 billion units a 22.2% year-over-year rise.

However, market demand outside AI remains weak, noted Zhang Li, Vice Chairman and Secretary-General of the China Semiconductor Industry Association. Capital expenditures for major global semiconductor firms are expected to decline slightly in 2024, with WSTS forecasting a slower 11.2% growth rate in 2025, bringing the global semiconductor market to $697.2 billion.

China's semiconductor sector faces a dual challenge: a push for domestic substitution of foreign technology and intensified internal competition. Thousands of domestic firms compete for market share, raising concerns of unsustainable price wars and overcapacity. Industry executives have questioned whether companies are truly engaging in domestic innovation or simply replacing one domestic supplier with another in a cutthroat market.

China's decision to stop purchasing Nvidia H20 AI chips for new data centers underscores a shifting dynamic. Instead, Chinese technology giants like Tencent, Alibaba, and Baidu are increasing procurement of domestically produced AI chips. Ant Group's technical team has reportedly reduced AI model training costs by 20% by leveraging chips from Alibaba and Huawei's Ascend series.

Despite efforts to localize production, China still relies on imported chips. In 2024, integrated circuit imports are expected to reach $385.65 billion, up 10.4% year-on-year, while exports will rise by 17.4% to $159.5 billion.

Meanwhile, investment in China's semiconductor industry is slowing. According to IT Orange, financing deals in China's chip sector fell by 14.45% in 2024, with total investment declining by 20.6 billion yuan. Analysts attribute the downturn to market saturation and shrinking opportunities for high-margin growth.

Globally, the semiconductor industry remains in flux due to geopolitical pressures. The United States recently added 54 Chinese tech firms to its Entity List, further restricting China’s access to critical semiconductor technologies. The Trump administration is also set to impose additional tariffs on semiconductor-related imports, heightening trade tensions.

While China continues to advance its semiconductor capabilities, experts warn that true self-sufficiency remains a long-term challenge. "China's chip industry must focus on sustained innovation rather than short-term substitution," said Wei. "The semiconductor sector requires long-term commitment, global cooperation, and a pragmatic approach to achieving technological breakthroughs."

(Note: 1 USD equals 7.18 yuan)