Is China’s mature-chip expansion really a problem?

China is funneling massive amounts of money into semiconductor manufacturing capacity. Last year, Chinese firms were responsible for over a third of the world’s semiconductor capex, according to data published by Semi. That’s up from less than seven percent in 2012 and up almost 30 percent over 2022 in a year that saw a -1 percent overall slowdown in equipment sales. Market researcher Trendforce estimates that 22 fabs are currently under construction in China, about half the number of plants already in operation there. The result could be a doubling of domestic manufacturing capacity within the next 5-7 years, according to one estimate.

These kinds of numbers are making Western policymakers nervous. As the investments are primarily targeting mature nodes (≥ 28nm), the West fears getting flooded by heavily subsidized chips in this segment, squeezing out Western competitors and fostering a dependency on China. The US recently raised tariffs on semiconductors and other Chinese technology goods, and more actions may follow. The European Commission said it will start an inquiry, adding to ongoing investigations into Chinese anti-competitive practices in the electric vehicle and solar panel markets.