China can make anything, except the chips

7/2/2018 8:53:33 AM

China has long ago mastered the art of making products with semiconductors (chips) aboard, like phones and servers, but manufacturing Chinese chips is not successful. Many billions have been invested in a R&D process that can take decades to see a return. The Chinese government wants results.

China is the world's biggest chip market, but the country only manufactures 16 percent of the semiconductors it uses. It imports about $200 billion worth annually and most attempts to change the balance failed.  Bloomberg reports that, until now, setting up local chip production has proven a tough process. “Expensive efforts to build a domestic industry from scratch in the 1990s faltered due to bureaucracy, delays and a lack of customers for the kind of chips China was making.”

With local chips and manufacturing lacking quality – and generally lagging behind one or two generations on western chips – buying a stake in foreign companies appears to be the shortest way to get the knowledge. But these efforts are regularly blocked by U.S. or European governments for security reasons. The same happens in Japan, South Korea and Taiwan, where Chinese acquisitions are watched with suspicion.

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