China is looking to boost its chip sector with a $140 billion investment to overcome US export curbs. The government plans to subsidize the purchase of domestically produced chipmaking equipment. However, the injection of funds alone may not be enough to help Chinese firms break from a cycle that hinders innovation and traps them at the low end of the value chain. Industry experts suggest that Chinese firms must break free from their current situation of mainly selling to domestic chip foundries, gain exposure to advanced chipmaking facilities and independently solve engineering problems to move up the value chain.
The lack of exposure to advanced facilities and technologies has made it challenging for Chinese firms to catch up with their Western rivals, who are generations ahead. SMEE, China’s sole semiconductor lithography specialist, has not made any significant advancements since 2018. Procuring equipment from abroad has been a challenge, limiting the firm’s production capabilities.
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Chinese chipmaking equipment manufacturers work closely with clients, offering long-term services including installation, calibration, maintenance and repair of machines that can cost over $100 million each. This collaboration can result in a substantial sharing of know-how that helps both sides advance technologically.
Some experts suggest that China should shift its focus to research and development for new technology and materials rather than compete with overseas peers in trying to make circuits on chips denser and denser. This approach could help China catch up and create countermeasures by amassing patents and managing their use overseas.