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China is a long way from semiconductor self-sufficiency, IC Insights reports. While China-based chip production will represent 21.2 percent of its domestic IC market in 2026, foreign companies such as Samsung, SK Hynix and TSMC are expected to comprise more than 50 percent of IC production in China through that period.
The Chinese government has made the development of the semiconductor industry a national priority in its 14th Five Year Plan and is targeting 70 percent of its chips to be made in China by 2025.
IC Insights makes a distinction between China’s IC market and China’s indigenous IC production. Although China has been the world’s largest chip consumer since 2005, it does not necessarily mean that large increases in IC production within China would immediately follow – if ever. IC production in China represented 16.7 percent of its $186.5 billion IC market in 2021, up from 12.7 percent 10 years earlier in 2011. IC Insights forecasts that this share will increase by 4.5 percentage points from 2021 to 21.2 percent in 2026 (a 0.9 percentage point per-year gain on average).
Of the $31.2 billion worth of ICs manufactured in China last year, domestic companies produced $12.3 billion (39.4 percent), accounting for only 6.6 percent of the country’s $186.5 billion IC market. TSMC, SK Hynix, Samsung, Intel, UMC, and other foreign companies that have IC wafer fabs located in China produced the rest. IC Insights estimates that of the $12.3 billion in ICs manufactured by China-based companies, about $2.7 billion was from IDMs and $9.6 billion was from pure-play foundries like SMIC.
If China-based IC manufacturing rises to $58.2 billion in 2026, as IC Insights forecasts, China-based IC production would still represent only 8.1 percent of the total forecasted 2026 worldwide IC market of $717.7 billion. Even after adding a significant markup to some of the Chinese producers’ IC sales (many Chinese IC producers are foundries that sell their ICs to companies that re-sell these products to the electronic system producers), China-based IC production would still likely represent only about 10 percent of the global IC market in 2026.
Since the advent of a global chip shortage two years ago, the U.S. and EU have also prioritized onshore semiconductor manufacturing and more localized supply chains. U.S. legislation would grant chip makers $52 billion in funding to expand output. The European Commission, the executive arm of the EU, announced a new European Chips Act that will enable 15 billion euros ($17.11 billion) in additional public and private investments until 2030. This is on top of 30 billion euros of public investments that had previously been earmarked.
The global chip industry is still heavily reliant on the Asia-Pacific region for semiconductor materials and services such as packaging. China is the largest producer of rare-earth minerals widely used in electronics. Semiconductor self-sufficiency in any region will require more than just fabs.