A few years ago, under the influence of international geo-trade relations, especially after EUV lithography machines were strictly controlled, China began to turn to the construction of mature process segment chip factories, and the overall production capacity continued to rise. On January 11, a research report by Barclays analysts pointed out that China's chip production capacity will more than double in five to seven years, based on the existing plans of local manufacturers.


There is no unique, recently, the International Semiconductor Industry Association (SEMI) also released the latest report. The report pointed out that although the global semiconductor industry is not very prosperous in 2023, the global fab capacity still increased by 5.5% to 29.6 million wafers per month, and the growth rate has not slowed down.

Data show that in 2023, China's mature process capacity has occupied 29% of the global mature process capacity, ranking first in the world.

Global chip production capacity has soared

In recent years, under the influence of geopolitics and the epidemic, chip independent supply has become the consensus of countries and regions around the world, and semiconductor industry policies have been introduced, which has also stimulated the expansion of localized chip production capacity. In the context of this industry, China has also accelerated the improvement of mature process chip production capacity to meet the actual needs of its own economic and industrial development.

In this regard, a number of Barclays analysts believe that in the next three years, China's chip production capacity has the potential to increase by 60%, including 40-65 nanometers of traditional chips will account for a larger piece of China's capacity expansion.

Of course, China is not the only part of the world expanding capacity. According to SEMI's latest "WorldFabForecast", global fab capacity is expected to grow by 6.4% in 2024, breaking through the 30 million wafers per month (WPM) level, which will hit a record high.

Especially as the demand for chips for artificial intelligence (AI) and high-performance computing (HPC) applications continues to grow rapidly, from Taiwan Semiconductor Manufacturing Company (TSMC) to Samsung and Intel are actively promoting capacity expansion.

SEMI expects as many as 82 new fabs to come on stream from 2022 to 2024, including 29 projects in 2022, 11 projects in 2023, and 42 projects in 2024, covering 100mm to 300mm wafers. And dozens of mature and leading semiconductor process technologies, demonstrating that this capacity expansion is diversified.

China's Taiwan region has the second highest semiconductor production capacity, with an annual capacity of 5.4 million wafers per month in 2023, which is expected to increase to 5.7 million wafers per month in 2024. South Korea and Japan are close behind, with South Korea expected to produce 5.1 million wafers per month in 2024.

Mature chips are also vents

According to industry conventions, the process of 28nm and above is called a mature process, and the process below 28nm, that is, the process of less than 28nm, such as 16nm, 14nm, etc., is called an advanced process, 28nm is the cut-off point.

From the point of view of the number of chip demand, mature processes of 28nm and above have accounted for about three-quarters of the global share, while advanced processes account for only a quarter.

From the perspective of chip manufacturers, there are not many manufacturers in the world that master advanced technology, strictly speaking, there are only four, respectively, TSMC, Samsung, Intel, SMIC, and most other manufacturers only focus on mature processes, such as UMC, GE Chip, Huahong and so on.

Therefore, in the past year, the vast majority of manufacturers, mainly to expand mature technology, after all, more than 75% of the market, is the current mainstream, advanced technology is only in the hands of some manufacturers, and the demand is not imagined. At present, only computer CPU, mobile phone Soc, AI, GPU chips can use advanced processes.

 On the one hand, it is because China is the world's largest chip market, accounting for about one-third of the world, and at present, China's local chip production capacity is seriously insufficient, the self-sufficiency rate is not high, and it needs to expand production to improve the self-sufficiency rate. On the other hand, at present, advanced technology is sanctioned by the United States, and China can only accumulate from mature technology and then slowly move to advanced technology.

Data show that in 2023, China's mature process production capacity has reached 29% of the world's, ranking first in the world.  

Among them, SMIC, Huahong Group and Hefei Jingheicheng are the most active in expanding production, focusing on special processes such as driver chips, CIS/ISP and power semiconductor discrete devices.  For the current semiconductor industry, in addition to a few application scenarios such as mobile phones and AI, most of the remaining chip 28nm process is sufficient. Therefore, it is very important for Chinese semiconductor manufacturers to expand production capacity to ensure demand.

Mature chips are also envied

Today, perhaps no country is paying more attention to the development of China's semiconductor industry than the United States. After limiting advanced process chips, the United States has targeted China's mature process chips.

On January 8, local time, Mike Gallagher, the Republican chairman of the U.S. House Select Committee on China, and Raja Krishnamoorthi, a Democrat, briefed Commerce Secretary Gina Raimondo and Trade Representative Mary Dedge (Katherine Tai) sent a joint letter calling on the United States to take immediate action to use all means, including tariffs, to reduce its dependence on mature chips from the Chinese mainland.

In a joint letter, the lawmakers pointed out that the imminent flood of basic chips made in China into the U.S. and global markets is worrisome, which poses a risk to U.S. economic security, but is far less concerned about advanced chips.

 Although these mature process chips are 10 to 20 years old technology, they are widely used in various electronic products, including some military equipment.

Rhodium Group also reported in April 2023 that China and Taiwan will account for nearly 80% of the global production capacity of 20-45nm fabs in the next five years.

Jimmy Goodrich, a senior consultant at RAND Corp., also said the data suggests China is expected to become the world's leading producer of traditional chips by 2030 and has a relatively self-sufficient supply chain.

For the expansion of China's mature process chip production capacity, US lawmakers have even proposed that the United States could tax the basic chip directly, rather than the finished product, through "component tariffs." They also called for the Commerce Department and the Trade Representative's office to submit a briefing within 60 days and a hearing on how to deal with the issue.

Judging from the U.S. policy toward China in recent years, although it is impossible for China and the United States to "decouple economically" in the short term, the risk of decoupling in this particular industry is increasing.