China's chip output jumps 350% in a decade, dominating legacy semiconductors and eroding US supply-chain control.
At 8 p.m. on July 28th, inside Zhangjiang Science City—Shanghai's largest semiconductor cluster—offices at Xinpu Tianying, the packaging subsidiary of China's CXMT, blazed with lights hours after normal business hours. Buses ferried employees in and out through the evening as workers appeared constantly visible throughout the complex.
CXMT, China's leading memory chipmaker, is constructing an additional wafer plant in Lingang New Area, roughly an hour away. Once operational, CXMT's production capacity will double from current levels by 2030, potentially exceeding even America's Micron. This expansion in legacy DRAM supply poses a direct threat to the profitability of Samsung Electronics and SK hynix.
CXMT's trajectory mirrors the broader challenge posed by Chinese semiconductors. Founded as a "startup" in 2016, the company survived a market where even manufacturing giants like Japan and Germany failed. It developed its first DDR4 product in 2018 and has since advanced to developing High Bandwidth Memory (HBM), the most cutting-edge memory technology available.
Alarm over "red fabs" has spread across global semiconductor markets. While China remains unable to compete in advanced processes below 7nm, it is rapidly expanding its dominance in legacy semiconductors with striking pace.
According to China's National Bureau of Statistics, Chinese semiconductor manufacturers produced 484.28 billion integrated circuits last year. In 2015, annual output was just 108.72 billion units—representing a nearly 350% surge over the decade. This reflects both the speed at which Chinese chipmakers pursue advanced technology and their formidable volume offensive in mature processes.
China's share of global mature-process semiconductor production capacity rose from 19% in 2015 to 33% in 2023, according to an opinion letter submitted by the Semiconductor Industry Association (SIA) to the U.S. Trade Representative last year. China accounted for 72% of global semiconductor production capacity increases during this period. The SIA noted that China hosts 20% of global semiconductor front-end manufacturing facilities and 40% of back-end facilities, while one-third of the world's electronics are manufactured there, giving it a critical position in the semiconductor ecosystem.
A U.S. Commerce Department Bureau of Industry and Security survey of semiconductor demand companies with annual revenue exceeding $3 trillion found that Chinese-made semiconductors have already penetrated American automotive, home appliance, industrial machinery, and defense sectors broadly. Only 17% of surveyed products contained no Chinese semiconductors at all. For 44% of products, it was impossible even to determine whether Chinese semiconductors had been used, reflecting the complex mix of components in modern electronics.
For Korea, which holds an overwhelming global lead in memory semiconductors, China's advance increasingly represents an existential threat. A senior official at a domestic semiconductor company stated: "Advanced products like DDR5 and HBM matter, but legacy chips account for roughly half our earnings. We used to profit from legacy chips through competitive pricing and reinvest in advanced products, but that formula no longer works." Korea's foothold in the global semiconductor market is gradually eroding.
Industry experts warn that China could monopolize the solar panel, electric vehicle, and legacy semiconductor markets. Some also predict that Korea will soon cede its No. 2 position in foundry (contract chip manufacturing) to China.
An industry official observed that while GPUs and smartphone application processors require massive computing power in minimal space, industrial power semiconductors, sensors, and lidar prioritize affordability and durability. "Mature-process semiconductors serve diverse applications, yet Korea's focus remains excessively narrow on advanced processes," the official said.
Kim Jung-ho, professor at KAIST's School of Electrical Engineering, emphasized: "Focusing solely on semiconductors, demand is enormous for power semiconductors needed in energy storage systems and AI data centers. These are currently imported mainly from Germany and Japan, making domestic production expansion essential." While the government has designated Busan as a specialized cluster for power semiconductor materials, parts, and equipment, Professor Kim noted that mass-production capacity remains limited.