China’s journey to a new horizon! The story being heard today about China’s chip making is like a fairy tale. There was a time when China was known only as a supplier of raw materials to the world of technology. But today, it is China that has invested 25 billion dollars in chip making equipment and puzzled the eyes of the whole world! Is it just a money game, or is there a deeper plan behind it?
When we look at this massive investment by China, we have to understand that this is not just an economic move. Rather, it is China’s journey towards a new horizon. A horizon where they want to produce the most important component of the technology, the chip, themselves. China no longer wants to depend on other countries. They are standing on their own feet, trying to build their own destiny.
China’s master plan targets investment of $50 billion
The goal behind China’s massive investment is to spend $50 billion on chipmaking equipment by 2024. If we go a little deeper, we will see that this plan of China is just a preparation for the future. China believes that the demand for chips in the technology market will increase manifold in the coming days. So they want to prepare now.
As part of China’s plan, more than a dozen new chip manufacturing fabs are coming online in 2024 and 2025. This is a huge opportunity not only for large companies but also for small and medium-sized chip makers. There are big names like SMIC (Semiconductor Manufacturing International Corp.) and Hua Hong , but with this new Chinese initiative, smaller chipmakers are also strengthening their position.
How aggressively is China investing?
Here’s a thing to think about—when the world is facing an economic recession, how is China investing so much? In fact, China is the only country that has increased its spending on Fab Tools compared to last year. While major economies such as Taiwan, South Korea, and even North America are cutting costs, China is holding its own and moving forward.
China’s influence and rise of companies in the global chipmaking industry
This Chinese venture is not only profitable for them, but is also changing the direction of the global chipmaking industry. Companies such as Applied Materials, Lam Research, KLA of the US and Tokyo Electron of Japan, ASML of the Netherlands are earning huge amounts of revenue from the Chinese market. About 49% of revenue for ASML and about 32% for Applied Materials came from Chinese companies.
This proves that China’s aggressive move has put China at the center of the global chipmaking industry. Those who do not have a presence in the Chinese market may not be able to survive in this industry. This Chinese investment has increased capital intensity in the global chipmaking industry, which has been growing at an annual rate of more than 15% for four consecutive years since 2021.
Future Challenges and Prospects of the Semiconductor Industry
Now the question is, how long will this situation last? According to a Nikkei report, spending on new semiconductor facilities in China is expected to normalize by 2024. However, spending on semiconductor equipment will increase globally during this period, particularly in Southeast Asia, the Americas, Europe and Japan. These regions are also making efforts to increase their chip production capacity.
One thing is clear, China’s huge investment is not only for improving their own technology, but also changing the direction of the global market. China is now at the center of the global chipmaking industry, which is a tough challenge for other countries.
How is China leading?
This is not the end of the story, it is only the beginning. China’s chipmaking revolution is taking the world to a new horizon. In this world of technology, China is now not just a player, but a leader. It is now clear that their journey will lead the global technology market to new possibilities. Can other countries take their place in this new world? That is the thing to watch now.
