BEIJING, July 8 — The semiconductor self-sufficiency drive at the heart of the Made in China 2025 industrial policy has reshaped the landscape of global chip supply chains since its formal announcement by Premier Li Keqiang in May 2015. The ambitious plan originally targeted 70% self-sufficiency in chips by 2025, though analysts estimated actual self-sufficiency stood at around 16% in 2022. China’s state-led investment machinery has poured enormous capital into closing that gap.
The National Integrated Circuit Industry Investment Fund, widely known as the ‘Big Fund,’ launched its first phase in September 2014 with initial capital of $19.5 billion. A second fund followed in October 2019 at $29 billion, and a third tranche of $47.5 billion was announced in September 2023.
Total state investment in the semiconductor sector is estimated at over $143 billion.
The flagship foundry under pressure
Semiconductor Manufacturing International Corporation, or SMIC, stands as the most prominent domestic chip manufacturer to emerge from this push. Founded in 2000 and headquartered in Shanghai, SMIC has achieved production down to 7 nanometers using deep ultraviolet lithography technology. The company was added to the U.S. Entity List in December 2020, a move that restricted its access to American technology and equipment.
That listing came as part of a broader escalation in technology competition between Washington and Beijing. The U.S. export controls of October 2022 specifically target advanced chips and chip-making equipment for China, including restrictions on ASML’s EUV lithography machines.
Design capabilities and sanctions
On the design side, China has relied heavily on HiSilicon, a subsidiary of Huawei founded in 1987. HiSilicon designed the Kirin 9000 chip before U.S. sanctions cut off its access to TSMC in September 2020. That disruption removed HiSilicon’s ability to fabricate its advanced designs at TSMC, the world’s leading contract chipmaker.
The combination of Entity List restrictions on SMIC and foundry access limitations on HiSilicon has created a dual bottleneck in China’s semiconductor ambitions. Domestic chip production remains heavily dependent on equipment and intellectual property that falls under U.S. export control regimes.
Market context and the road ahead
Figures show that despite the massive state investment exceeding $143 billion across the Big Fund’s three phases, the self-sufficiency rate has remained far below the 70% target. Analysts’ estimate of 16% self-sufficiency in 2022 illustrates the scale of the challenge facing Chinese chip makers. SMIC’s ability to produce at 7 nanometers using DUV lithography represents a significant technical achievement.
However, the restriction on accessing EUV machines from ASML effectively caps the domestic industry’s ability to move to more advanced production without a breakthrough in alternative manufacturing techniques. The U.S. export controls of October 2022 added further layers of restriction, specifically targeting advanced chips and the equipment needed to make them.
These rules have forced Chinese companies to accelerate domestic substitution efforts while navigating a tightening regulatory environment. For the broader supply chain, the implications are clear. China remains the world’s largest consumer of semiconductors, and the gap between domestic demand and domestic production capacity continues to drive investment.
The Big Fund’s third phase, announced in September 2023 with $47.5 billion in committed capital, signals that the state intends to maintain its push despite the external restrictions. Industry observers are watching closely to see whether SMIC can advance its process technology without EUV access, and whether Chinese equipment makers can fill the gaps left by restricted foreign suppliers.
The answer will determine whether the Made in China 2025 semiconductor targets remain aspirational or become achievable in the years ahead.
