Roadblocks to China’s chip self-sufficiency dream

China is unlikely to achieve full chip self-sufficiency any time soon because of high technological hurdles in producing advanced manufacturing equipment and materials. The self-sufficiency target now stretches well beyond actual fabrication to include the entire chip supply chain as China struggles to acquire necessary input and machinery into the production process.

The US and its allies have been trying to cut China from their chip supply chains for some time now to deter China’s advancement, but that has come with the undesirable consequence of strengthening China’s resolve to build a chip supply chain entirely on its own. This seems like a natural course of action for China, but such a plan is easier said than done.

China will likely struggle to produce certain cutting-edge chip manufacturing equipment. A prime example is the process called lithography, a field currently dominated by players in the Netherlands and Japan. Although China has made great advances in other equipment, lithography remains a critical area of challenges. Materials like photoresist and silicon wafer will likely be another bottleneck, especially given the high level of quality and purity required for advanced chips. Such hurdles will directly affect the quality of chips, which will have implications for the capability of AI models that are trained and run on the chip infrastructure.

China’s long-term growth outlook hinges entirely on productivity given negative demographics and a diminishing workforce. Therefore, obtaining chip self-sufficiency and thus advanced computing capability have material economic implications over the long run.