China's shortage of advanced semiconductors is set to shrink sharply over the next decade as the country pushes for chip self-sufficiency. China's chip self-sufficiency rate has reached about 70% this year, nearly double the level of 2010.
Goldman Sachs projected in a report released on the 24th that China's supply of wafers produced on advanced nodes of 7 nanometers or below will grow at an average annual rate of 46% from last year through 2035, according to the South China Morning Post. That far outpaces the projected demand growth of 17% a year over the same period.
The investment bank expects the gap between supply and demand for advanced-node chips in China to narrow to 34% by 2035 from 92% last year. By 2035, advanced-node wafer supply is forecast at 410,000 units a month against demand of 619,000 units a month.
The supply expansion is driven by China's chip localization policy, led by aggressive capacity additions and yield improvements at SMIC, the country's largest foundry. Beijing accelerated its localization drive after Washington tightened restrictions on Huawei in 2020. Despite U.S. controls on exports of advanced chipmaking equipment, SMIC succeeded in 2023 in producing the 7-nanometer chip used in Huawei smartphones.
Goldman Sachs assumed SMIC will add 30,000 to 50,000 wafers a month in advanced-node capacity each year from this year through 2031, followed by annual additions of 20,000 wafers a month through 2035. Yields are expected to rise to 50% in 2030 and 75% in 2035, from 23% in 2026. China's chip self-sufficiency rate has already climbed to 70% on an output basis, up sharply from 38% in 2010.
Chinese companies are also ramping up capital spending. Goldman Sachs expects China's semiconductor capital expenditure to keep growing at a rate in the 10% range each year, reaching $82 billion by 2030. Lithography equipment, still subject to U.S. export controls, remains the weakest link in China's chip equipment ecosystem, the SCMP reported.
Goldman Sachs also projected that ChangXin Memory Technologies, which recently raised a large sum through an initial public offering, could meet about 50% of China's DRAM demand and 40% of its high-bandwidth memory demand by 2028. Still, the bank said lithography restrictions leave CXMT two to three generations behind global players such as Samsung Electronics and SK hynix.
