[Taiwan Chip News] "China to catch up with Taiwan technology in 3 years... 45% global foundry market share in 3 years"

China's largest telecommunications equipment company, Huawei, has reportedly narrowed the technology gap with TSMC, the world's leading foundry (semiconductor contract manufacturing) company, to three years. Huawei is known to produce chips with quality comparable to those of Nvidia, the world's top artificial intelligence (AI) semiconductor company based in the United States. In particular, China's global foundry market share, including processes of 28 nanometers (nm) and above, is expected to rise to 45% within three years. Despite U.S. sanctions, Chinese companies including Huawei have succeeded in semiconductor localization, emerging as a significant variable in the global semiconductor market.

The Huawei logo of the Chinese company is engraved on the Huawei phone screen taken by a London photographer.
[Photo by AFP Yonhap News]

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According to the semiconductor industries in Japan and Taiwan, a Japanese semiconductor research firm analyzed Huawei's latest smartphone and found that China's semiconductor technology has narrowed the technology gap with TSMC by about three years. According to Nikkei, the Japanese semiconductor research company TechanaLye compared Huawei's 2024 latest model Pura 70 Pro with the 2021 model and found their performance to be nearly similar.

Yoji Shimizu, president of TechanaLye, stated that the chip installed in the Pura 70 Pro is the Kirin 9010, a 7nm application processor (AP) made by Chinese semiconductor manufacturer SMIC, which has performance similar to the TSMC 5nm AP Kirin 9000 installed in the 2021 Huawei phone.

President Shimizu added that since SMIC's process level is similar to TSMC's level from three years ago, this suggests that China's semiconductor technology has reduced the gap with Taiwan to three years. However, there still appears to be a gap in yield (the ratio of good products). He also emphasized that 86% of the semiconductor components in the Pura 70 Pro are made in China, highlighting a significant improvement in China's semiconductor self-reliance capabilities. This indicates that China is gradually approaching the stage of self-sufficiency in the semiconductor industry.

According to the Semiconductor Equipment and Materials International (SEMI), China is actively expanding its production capacity of semiconductor wafers using mature (older) processes in response to U.S. sanctions. As a result of these efforts, China is expected to account for about 30% of the world's wafer production capacity by next year. President Shimizu evaluated that U.S. sanctions have only slightly delayed China's technological innovation but have rather promoted the self-sustaining power of China's semiconductor industry.

President Shimizu also analyzed that U.S. controls are mainly limited to advanced semiconductors for servers such as AI, and do not affect other semiconductors that do not pose a military threat. He estimated that China is honing its technology by purchasing large quantities of equipment not subject to U.S. controls.

China's non-memory semiconductors pose a major challenge not only to foundry companies like TSMC but also to U.S. big tech companies like Nvidia. Huawei's latest processor, Ascend 910C (Chinese name: Shengtu 910C), scheduled for shipment in October, is reported to have performance similar to Nvidia's H100 chip. According to The Wall Street Journal (WSJ), Chinese big tech companies such as ByteDance, Baidu, and China Mobile plan to purchase the Ascend 910C, with their order volume expected to reach $2 billion (approximately 2.7 trillion KRW).

The U.S. Department of Commerce effectively placed Huawei on a trade restriction blacklist in May 2019. In August 2022, it also banned Nvidia and AMD from exporting related semiconductors to China, citing risks that the Chinese military might use AI graphics processing unit (GPU) semiconductors. U.S. big tech companies have expressed direct and indirect dissatisfaction with the U.S. government's sanctions on China.

Taiwan market research firm TrendForce reported in May that the global foundry market share as of this year is Taiwan (44%), China (28%), South Korea (12%), the U.S. (6%), and Japan (2%). By 2027, Taiwan is expected to decline by 4 percentage points to 40%, and South Korea by 2 percentage points to 10%, while China is projected to increase by 3 percentage points to 31%. Including processes of 28nm and above, Taiwan's share is expected to drop 5 percentage points from 42% this year to 37%, and South Korea's from 9% to 7%, a 2 percentage point decline. During the same period, China's share is expected to jump 12 percentage points from 33% to 45%.

TrendForce stated, "Chinese semiconductor companies, focusing on expanding mature process capacity and receiving government subsidies, are expected to grow their market share to 31% by 2027, achieving relatively strong performance in the global market share."

Taiwan Economic Daily News = Lin Chenyi / Translation = Asia Economy

※ This article is reprinted based on a strategic partnership between this publication and Taiwan Economic Daily News.

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