US sanctions transform China into legacy chip production juggernaut — production jumped 40% in Q1 2024

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US sanctions transform China into legacy chip production juggernaut — production jumped 40% in Q1 2024

The U.S. semiconductor export sanctions could be backfiring, in a way, according to a report from

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. China’s semiconductor output of legacy semiconductor chips grew by a whopping 40% in the first quarter of 2024. The massive surge in production suggests China could potentially become the global leader in legacy chip production.

A big reason for the surge: there are no trade restrictions on ‘mature chips,’ or chips that utilize 28nm or older process technology. The U.S. government purposefully left these chips out of its sanctions to ensure supply chain resistance — these older chips are used extensively in a range of important devices, such as basic electronics (e.g. toasters, phones, medical equipment) and cars, and disrupting the supply chain could cause global issues. Also, the U.S. government determined that these chips do not pose a threat to national security (at least, not the way newer chips do). 

As a result, China’s national semiconductor output of legacy chips reached an all-time high, with 36.2 billion units produced in March alone. Reports claim that China’s output over the past three months is almost three times what it produced in Q1 2019, which was when China started implementing its plan to bring chip production back in-house. 

Thanks to U.S. sanctions, most new ******** investments have focused on mature semiconductors rather than bleeding-edge semiconductor nodes. Heavy state-wide backing has also assisted, and is believed to be the main proponent driving China’s huge production gains — to the point where China is overproducing chips. 

At this rate, China is headed toward global dominance of legacy chip production, according to reports. China’s mature-process production capacity is expected to reach 39% of global market share by 2027 — up from 31% (last year).

This trend could continue beyond 2027 if the U.S. continues to enforce its current regulations. China has had no choice but to produce chips using older process technologies, as it has no mainstream method of competing with companies such as Intel and TSMC on bleeding-edge process nodes. China is desperate to become self-sufficient, but it has no way of obtaining the proper lithography tools needed to build cutting-edge microchip processors. 

Ultimately, China still relies heavily on chip imports (of the chips it can still receive, that is). In fact, reports reveal that China’s semiconductor imports have grown by 12.7% in Q1 2024, so it’s not doing the best job at pursuing self-sufficiency (yet). 

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