China's $40B Chip Bet Challenges U.S. Tech Dominance

China’s decades-long effort to build semiconductor independence has dramatically intensified in response to U.S. export restrictions.

While the country’s chip ambitions date back to the 1950s, a major strategic shift occurred post-1978 economic reforms and gained structure with the Made in China 2025 initiative, targeting 70 percent self-sufficiency in semiconductor production by 2025—a goal still in reach despite challenges. As of 2024, China commands one-third of global semiconductor capital expenditure, up 28 percent year-on-year and nearly five times 2012 levels. Firms like HiSilicon and SMIC have made headway, but face bottlenecks in producing cutting-edge chips due to reliance on Western lithography tools and advanced AI chip architectures.

Key Highlights

China accounts for 33 percent of global chip investment, up 28 percent YoY
Plans for $40B semiconductor fund to boost self-sufficiency
Strategic pivot away from advanced AI chips toward mid-range tech

In response, China is shifting focus to sectors where mid-range chip capabilities suffice, such as robotics. A Suzhou-based robotics firm reports 90% component independence—signaling strategic adaptation. Additionally, China is expected to launch a new $40 billion state-backed semiconductor fund, aiming to reduce reliance on US technology and potentially spark global chip price wars.

Also Read: Malaysia to Strengthen Semiconductor Rules Amid US Pressure

This effort is supported by China’s aggressive downstream control of critical minerals and expansion in digital infrastructure, aligning with its next-generation industrial revolution strategy. However, the tech bifurcation comes with geopolitical friction. U.S.-China trade, once tightly integrated, is now becoming a battlefield of leverage—most notably through rare earth mineral controls and semiconductor bans.

Paradoxically, U.S. sanctions are accelerating China’s domestic innovation and creating a parallel tech ecosystem that may reshape global supply chains for decades to come.