Feb 28, 2025 08:00:00

It is predicted that 28% of the world's 'legacy chips' will be made in China, and the share will increase with chips that are inferior to the most cutting-edge but are in high demand

China, which is facing difficulties in manufacturing cutting-edge semiconductors due to US sanctions, is expected to hold 28% of the total semiconductor market share by the end of 2025. Technology media Tom's Hardware explains how China is expanding its market share and what kind of semiconductors are exported from China.

China's mature chips to make up 28% of world production, creating oversupply — Western companies express concern for their survival | Tom's Hardware

https://www.tomshardware.com/tech-industry/chinas-mature-chips-to-make-up-28-percent-of-world-production-creating-oversupply-western-companies-express-concern-for-their-survival

China's self-sufficiency rate for semiconductors has been increasing year by year, and its rate, which was approximately 14% in 2014, is expected to nearly double in 10 years, reaching 27% by 2027.

China manufactures a large number of semiconductors called 'legacy chips' made using processes of 20 nm or more. China, which has been cut off from the supply of equipment to make high-performance semiconductors due to US sanctions, is trying to gain global dominance by focusing on the manufacture of legacy chips, which have lower performance and are widely used in home appliances and automobiles.

China's integrated circuit production is increasing 40% year-on-year to 98.1 billion units, and it is becoming a legacy chip production powerhouse due to US sanctions - GIGAZINE

According to Tom's Hardware, legacy chip production nodes and silicon wafers in production are a valuable source of funding for the research and development departments of the entire semiconductor industry, making it possible to develop cutting-edge chips. However, China's dominance in this field has dealt a major blow to the global market for legacy chips and silicon wafers, with Western competitors struggling to cope with fierce supply and low prices. Some investors are predicting a 'China shock' in chip manufacturing.

Tom's Hardware reported, 'In 2025, it will become increasingly difficult for Western companies to compete with Chinese fabs that offer products at prices that are too cheap to compete with. China's semiconductor sector is shifting its focus to legacy chips to meet domestic technology needs, as Chinese companies cannot access the latest process nodes and manufacturing equipment, mainly due to US sanctions. Chinese semiconductor factories are expected to account for 28% of global chip production capacity by the end of 2025.'

With Donald Trump taking office as president, the United States has strengthened its sanctions. In February 2025, President Trump signed a new executive order to impose an additional 10% tariff on imports from China, dealing a major blow to Chinese mail-order apps such as SHEIN, Temu, and AliExpress.

President Trump signs executive order to impose additional tariffs on China, Canada, and Mexico and end tariff exemptions for low-cost imports, potentially affecting low-cost online shopping apps such as Alibaba, SHEIN, and Temu - GIGAZINE

According to the New York Times, President Trump's sanctions measures are 'just the beginning,' and he is working behind the scenes to impose regulations, such as by replacing senior Commerce Department officials and recommending as a candidate for Secretary of Commerce a person who advocates tougher restrictions on Chinese technology companies, amid ongoing discussions about regulating semiconductor manufacturing equipment.

Meanwhile, China is investing in semiconductors at the national level, and has succeeded in raising large amounts of capital, such as China's semiconductor support fund 'Big Fund' raising 687 billion yuan (about 14.1 trillion yen) in three rounds. In addition, Chinese electronics giant Huawei has reportedly increased the yield of its Ascend series AI chips from 20% to nearly 40% in one year, and is aiming to increase the yield to 60% in the future, showing a prosperity that is not affected by sanctions.

China's rise has already hit some companies hard, with American semiconductor company Wolfspeed seeing its share price fall 96% in three years after being outbid by Guangzhou Summit Crystal Semiconductor, and fellow American company ON Semiconductor announcing layoffs affecting 9% of its workforce.

'It's not as if China is to blame for the decline of these companies, but the US government has noted that the rapid rise of China's legacy chip manufacturing is impacting US industry. The full impact of the US-China 'chip war' is yet to be seen, but China's oversupply could affect companies in China as well,' Tom's Hardware said.