As global technological competition enters a critical phase, the semiconductor industry is defining the underlying logic of a new technology cycle with unprecedented significance. This industrial cluster, covering integrated circuits, display panels, photovoltaics, LEDs, sensors, and other trillion-dollar markets, serves as the “grain” of the digital economy and the “skeleton” of high-end manufacturing. As Moore’s Law approaches its physical limits, and new demands arise from AI and carbon neutrality, while geopolitical factors reshape industry chain rules, the semiconductor sector has evolved from a mere technological race to a battleground for national technological strength. In this war without gunpowder, “domestic substitution” is no longer a spontaneous choice of enterprises but rather an inevitable breakthrough driven by the collective will of the entire industrial ecosystem.
1. Variations in the Technology Cycle: Why is the Semiconductor Industry the Engine of the New Cycle?
The technological revolution in human society has always revolved around the conversion of “energy” and “information.” If the steam era was about the large-scale use of mechanical energy, and the electrical era was about the long-distance transmission of electrical energy, the information age represents the efficient conversion of “energy-information”—with semiconductors being the core medium of this conversion. Currently, the world is at a critical juncture transitioning from “Internet+” to “Intelligent+”, elevating the strategic position of the semiconductor industry to a historical high.
On one hand, traditional demand continues to expand. The emergence of new scenarios such as electric vehicles, AI computing power, and the metaverse has led to exponential growth in semiconductor demand. According to SEMI data, the global semiconductor equipment market reached $100 billion in 2023, with the Chinese market accounting for over 30%; in the photovoltaic sector, for every 1% increase in global new installed capacity, there is a need for approximately 3 billion yuan of new semiconductor demand (such as IGBT and HJT target materials). On the other hand, technological innovation is forcing industrial upgrades. After the slowdown of Moore’s Law, advanced packaging, Chiplet technology, and third-generation semiconductors have become key paths for breakthroughs, shifting the semiconductor industry from a “single process competition” to a “system innovation competition.”
More importantly, the semiconductor industry is one of the few technological fields where China and the global market have almost started simultaneously. China has already captured over 70% of global capacity in the photovoltaic sector, surpassed South Korea in display panels, and is gradually narrowing the gap with international competitors in storage chips and power semiconductors. This “local leading + overall catching up” situation makes it the most resilient strategic pivot in this technology cycle.
2. The Challenge of Domestic Substitution: From “Single Point Breakthrough” to “Ecosystem Reconstruction”
The essence of domestic substitution is the transformation of China’s semiconductor industry from a “global division participant” to a “rule maker.” Over the past decade, driven by policy guidance (such as the “02 Special Project” and the “14th Five-Year Plan”), capital support (the first and second phases of the National Fund, the Science and Technology Innovation Board), and corporate breakthroughs, domestic substitution has progressed from “usable” to “well usable,” but significant differentiation exists across different segments.
In mature segments, we have built global competitiveness. For example, in photovoltaics, Chinese companies hold over 70% of the global market share in silicon wafers (LONGi Green Energy), batteries (Tongwei Co.), and modules (Trina Solar), with advanced battery technologies like PERC and HJT continuously breaking production efficiency records; in the display panel sector, BOE and TCL Huaxing together account for over 50% of global LCD capacity, with OLED yield rates exceeding 90%, breaking the monopoly of Samsung and LG. The domestic substitution in these areas is fundamentally a victory of “scale advantages + engineer dividends”—reducing costs through continuous expansion and surpassing international competitors through technological iteration.
In high-end segments, we still face a “bottleneck” challenge. In integrated circuit manufacturing, SMIC has achieved mass production of 14nm processes, but advanced processes of 7nm and below are limited by EUV lithography machines; in the equipment sector, Shanghai Micro Electronics’ DUV lithography machines have entered customer validation, but the localization rate of equipment such as coating and developing, and ion implantation is less than 20%; in the materials sector, Anji Technology’s polishing liquids and Tongcheng New Materials’ photoresists have achieved partial substitution, but high-purity silicon wafers (with Shin-Etsu and SUMCO accounting for 70% of the global market) and electronic specialty gases (with Air Products accounting for 40%) still rely on imports. Breaking through these “hard bones” requires the patience of “ten years to sharpen a sword”—Yangtze Memory Technologies took 8 years to complete the leap from 32-layer to 232-layer 3D NAND, and Zhongwei’s etching machines have entered the 5nm production line, exemplifying this long-termism.
The deeper logic of domestic substitution is the innovative model of “leading enterprises + ecosystem collaboration.” Huawei Habo has invested in over 60 semiconductor companies, covering the entire chain from materials, equipment, to design tools; the “Integrated Circuit Innovation Consortium” led by SMIC collaborates with universities and research institutes to tackle advanced process technologies; Yangtze Memory Technologies has driven domestic equipment and material companies into its supply chain, forming a positive cycle of “application validation – technology iteration – large-scale commercialization.” This model of “leading enterprises guiding, ecosystem coexisting” is transforming dispersed enterprise innovation into systemic capabilities.
3. The Power of Collective Will: National Strategy, Industrial Collaboration, and Cultural Awakening
The domestic substitution in the semiconductor industry is not merely a “lone battle” by enterprises, but a collective action driven by national will, industrial consensus, and national confidence. This “collectivity” is reflected in the deep integration of three levels:
First, the top-level design of national strategy. From the “Made in China 2025” initiative listing integrated circuits as one of the ten key areas, to the “14th Five-Year Plan” proposing concentrated efforts on key core technologies like integrated circuits, and the National Fund’s cumulative investment of over 300 billion yuan to leverage social capital, national will provides clear directional guidance and resource assurance for the industry. This institutional advantage of “concentrating efforts to accomplish major tasks” is particularly crucial in responding to technological blockades—facing U.S. sanctions against Huawei and SMIC, the state quickly introduced a combination of tax incentives, financing support, and talent introduction to ensure industrial resilience.
Second, the collaborative evolution of the industrial chain. The semiconductor industry is a typical “vertically integrated” industry, where any weakness in one segment can constrain the overall level. In recent years, domestic enterprises have gradually shifted from “fighting alone” to “mutual backup”: equipment companies provide validation platforms for SMIC, material companies optimize formulations for Yangtze Memory Technologies, and design companies work with manufacturing companies to jointly define product specifications. The formation of this “community of shared destiny” marks the transition of China’s semiconductor industry from “commercial competition” to “strategic collaboration.”
Third, the underlying support of cultural confidence. In the past, Chinese enterprises were often seen as “technology followers,” but in the semiconductor field, “independent innovation” has become an industry consensus. Young engineers take pride in joining companies like Zhongwei and Changxin, universities prioritize semiconductors as key disciplines, and capital is more willing to invest in “hard technology.” This cultural awakening is fundamentally a belief in “technological self-reliance”—just as Huawei’s spirit of “breaking through the sky” in R&D, the people in China’s semiconductor industry are proving through their actions that core technologies cannot rely on external sources but must be fought for and created independently.
4. Future Outlook: A Qualitative Change from “Substitution” to “Leadership”
Standing at a new historical juncture, the domestic substitution in the semiconductor industry has entered a “deep water zone.” The key to the future lies in achieving a qualitative change from “substitution” to “leadership”: on one hand, consolidating advantages in mature fields by reducing costs through technological iteration and solidifying global market share; on the other hand, continuously breaking through in high-end fields, promoting the industrialization of EUV lithography machines, advanced packaging, and third-generation semiconductor technologies, and participating in the formulation of global standards.
The deeper significance lies in the fact that the breakthrough in the semiconductor industry will reshape the underlying logic of China’s technology industry. It will not only cultivate a batch of globally competitive enterprises but also drive the upgrading of foundational industries such as materials, equipment, and software, providing a replicable “semiconductor paradigm” for China’s technological self-reliance and strength. When collective will transforms into industrial momentum, and technological breakthroughs solidify into core capabilities, the semiconductor industry will ultimately become the “engine” of China’s technology cycle, leaving a deeper “Chinese imprint” on the global industrial landscape.
This breakthrough battle has no endpoint, but every step is taken firmly. Because we know: every progress in the semiconductor industry is a leap in China’s technological strength; every breakthrough in domestic substitution is a surge in national rejuvenation.