In the electronic chip market, China is approaching Europe and the United States, which produce 10% and 12% of the world’s semiconductors respectively. However, the Chinese state has no global heavyweight in this sector.
If China has become a global technological reference, under the impetus of local digital champions such as BATX (Baidu, Alibaba, Tencent and Xiaomi), it is however struggling to establish itself in the semiconductor industry. Admittedly, the Middle Kingdom is getting closer to Europe and the United States, which respectively produce 10 and 12% of the world’s semiconductors, but the Chinese state has no global giant in this sector. . And this while the island of Taiwan, less than 200 km from the Chinese coast, is the cradle of TSMC, the world’s leading subcontractor in the manufacture of electronic chips, which plans to invest 36 billion euros just to the year 2022.
In this context, Beijing is trying to react to get back into the race. This is the ambition of the Made in China 2025 plan launched in 2015. By this time, China plans to produce 70% of its annual national consumption of electronic components, compared to 15% currently. Semiconductors are also at the heart of the 14th five-year plan for the period running until 2025. However, Chinese ambitions are hampered by American sanctions, which penalize many heavyweights of the Middle Kingdom.
Chinese foundries are not immune to Sino-American tensions, like Semiconductor Manufacturing International Corporation (SMIC), which was placed on the export blacklist by the Trump administration in 2020, preventing the company from access to high-end American technologies. SMIC would thus have “four to five years behind TSMC’s technology, despite nearly two decades of investment”according to a note published in 2021 by the think tank Brookings Institution under the very evocative title Lagging but motivated (Late, but motivated).
Rare earths, China’s luxury joker
However, China is waking up and increasing colossal investments in order to afford strategic independence for the production of these electronic components, present in almost all connected objects. Thus, no less than 28 projects for new semiconductor factories were put into orbit last year. Amount of this war effort: 26 billion dollars. But developing the technologies needed to design cutting-edge chips yourself takes time. Time is running out, as the global semiconductor market is set to double by 2030 to reach $1 trillion.
Nevertheless, Beijing has a joker, and not the least: rare earths. These refer to a group of metals with exceptional properties used for the manufacture of high-tech products. And China has quite a card to play since it represents more than 60% of the world’s production of rare earths. Ten years ago, this percentage was even 97%! Reserves also exist in Russia, the United States and even India, but they are currently little or not at all exploited. And for good reason, the extraction and processing of rare earths are particularly polluting, with toxic waste as a result. But China doesn’t care, given the competitive advantage this can offer it in the global semiconductor market. And there is no doubt that Washington will watch out and seek to put a spoke in the wheels of Beijing, which has dreamed of seizing Taiwan for decades…