China's Semiconductor Rise Unfazed by US Sanctions... Ongoing Concerns for Korea's Semiconductor Industry

Shenzhen in China Expands Semiconductor Cluster, Announces Semiconductor Development Plan
China Refuses to Abandon Semiconductor Ambitions Despite Comprehensive US Regulations
Prolonged US-China Conflict Raises Concerns for South Korea's Semiconductor Industry

Chinese President Xi Jinping [Photo by Yonhap News]

[Asia Economy Reporter Kim Pyeonghwa] The United States continues to tighten semiconductor regulations against China, but China is boldly expanding its semiconductor support policies, demonstrating its ongoing ambition in the semiconductor industry. As the uncompromising hegemonic competition between the U.S. and China continues in the semiconductor sector, concerns within the domestic semiconductor industry are inevitably increasing.

According to the Hong Kong media outlet South China Morning Post (SCMP) on the 16th, Shenzhen City in Guangdong Province, China, announced a semiconductor industry development plan on the 8th (local time). The plan includes subsidies of up to 1.5 billion yuan per facility for semiconductor companies in Shenzhen that upgrade their production lines. For advanced semiconductor research and development (R&D), annual support of up to 10 million yuan will be provided. Companies using open semiconductor design technology or Chinese semiconductor electronic design automation (EDA) software will also be promised subsidies of up to 10 million yuan. Support for infrastructure costs such as water and electricity is included as well.

This plan drew attention as it was announced immediately after the U.S. announced semiconductor equipment export restrictions. Amid escalating U.S. regulations against China, China responded by unveiling measures to foster its domestic semiconductor industry. SCMP interpreted this as, "As the U.S. tightened regulations against China, Shenzhen promised local subsidies and cash compensation to semiconductor companies, doubling efforts to grow its domestic semiconductor industry."

Earlier, on the 7th (local time), the U.S. Department of Commerce announced a ban on semiconductor equipment exports to Chinese companies producing DRAM under 18 nanometers (nm), NAND flash with 128 layers or more, and logic semiconductors under 14 nm. Although there were existing restrictions, such as requests to the Dutch company ASML to ban exports of extreme ultraviolet (EUV) lithography equipment essential for advanced processes to China, this time the scope of regulations was expanded comprehensively. The U.S. has also blocked exports of EDA software and graphics processing units (GPUs) for artificial intelligence (AI) to China.

Despite these U.S. sanctions, China continues its semiconductor ambitions by expanding semiconductor production facilities in Shenzhen following Shanghai. Shenzhen was previously home mainly to semiconductor integrated circuit (IC) design companies. The city plans to establish a comprehensive semiconductor cluster including design, production, and packaging. In June, Shenzhen announced plans to increase the cluster's revenue from 110 billion yuan last year to 250 billion yuan by 2025. Although adverse conditions persist, such as 3,420 local semiconductor companies going bankrupt last year despite massive government support, the Chinese government's commitment to semiconductors remains unwavering.

Industry experts believe that as semiconductors emerge as the core of global technological hegemony, the tug-of-war between the U.S. and China over the related industry will continue. With Chinese President Xi Jinping’s third term virtually confirmed, some analysts suggest his long-term leadership could deepen conflicts between the two countries. The U.S. is also taking a tough stance to cut off China’s semiconductor ambitions, indicating that tensions in the semiconductor sector between the two nations are likely to persist.

In this context, domestic semiconductor companies such as Samsung Electronics and SK Hynix, which operate factories in China, inevitably face ongoing challenges. Samsung Electronics produces about 40% of its NAND flash in China. SK Hynix fulfills 50% of its total DRAM production in China alone. The fact that China is the largest semiconductor consumer market adds to their concerns. An industry insider explained, "From the perspective of domestic semiconductor companies, it is difficult to ignore the nearest market with abundant business opportunities."

The U.S. decision to impose semiconductor equipment export restrictions on China but grant a one-year grace period to major domestic and international semiconductor players, including Samsung Electronics and SK Hynix, is a positive factor. However, since this is a temporary measure and the situation could change rapidly depending on future U.S.-China conflicts, long-term risks remain. There are also concerns as U.S. semiconductor equipment companies are already showing signs of withdrawing from the Chinese market. Professor Lee Hyuk-jae of Seoul National University’s Department of Electrical and Computer Engineering predicted, "In the long term, it does not seem likely that this issue (U.S.-China conflict) will be resolved."

This content was produced with the assistance of AI translation services.