The recent U.S. congressional hearing brought the “export control loopholes” and “China’s stockpiling of equipment” to the forefront: U.S. lawmakers and former officials emphasized that China still has shortcomings in the most advanced processes (such as EUV/3nm), while being wary of China’s ability to cut off the U.S.’s influence in the basic electronics market through the expansion of mature nodes and sufficient capacity.
PART.01Can China Manufacture the Most Advanced Chips?U.S. Secretary of Commerce Gina Raimondo publicly criticized Chinese chip companies during the hearing: “They claim they are producing advanced chips for AI training and smartphones, but in reality, they are not; it is all just bluster.”What is the actual situation?Overall, it is still limited, but the gap is narrowing. The judgments from Congress and the U.S. Department of Commerce are based on the fact that extreme advanced processes, such as the complete EUV ecosystem mastered by leading manufacturers, still face bottlenecks in equipment, materials, and design tools.However, we have made significant progress in several high-end fields through substantial capital investment and domestic R&D, so we cannot simply label China as “completely incapable”. Although the U.S. has taken away EUV equipment that originally belonged to Chinese companies, Chinese firms can still use previously imported equipment and multiple exposure techniques to manufacture advanced chips, but this requires higher standards for backend manufacturing equipment such as etching machines and thin-film deposition.PART.02Preparing for BattleIn the face of Western forces’ encirclement, we have seized the opportunity to manufacture advanced chips by stockpiling legal equipment in advance, successfully achieving mass production and commercialization of advanced chips.Part of this is compliant procurement of advanced equipment (when it was not fully embargoed), while another part involves placing large orders for old/mature process equipment (DUV, mature node production lines). The economic motivations for these two types of procurement are different: advanced equipment is aimed at catching up with the technological frontier, while mature equipment is to ensure large-scale shipments and achieve victory through volume.According to various public sources and statements from ASML executives, Chinese customers indeed became an important source of revenue for them around 2023, but ASML has repeatedly stated that the delivered systems are in use, not merely stockpiled. In other words, we were well-prepared in the face of Western forces’ encirclement.PART.03Mature Chips Suppressing the U.S. MarketMature node chips, such as those used in home appliances, automobiles, the Internet of Things, and many consumer products at 28nm and above, are not in a technology monopoly field, but the volume is huge, and while profits are thin, they are very stable.China’s capacity expansion in these mature nodes has led to two direct consequences: first, the price of mature chips in the global supply chain has decreased, and second, Chinese manufacturers can meet domestic and export market demands at a lower cost, thereby exerting price and market pressure on certain mid-to-low-end products from U.S. and allied manufacturers.Official and research reports also show that China’s share of basic wafer production capacity has significantly increased in recent years (notably since 2015), which is the root cause of the market impact brought by the expansion of mature nodes.According to the investigation data from the U.S.-China Economic and Security Review Commission, China’s monthly chip production capacity was only 1.2 million wafers in 2015, but by 2023, its monthly wafer production capacity has reached over 3 million, an increase of 250%.
In summary, today’s reality is neither a simple “U.S. victory” nor a “Chinese dominance”. It resembles an evolving game: one side is maintaining technological advantages through rules and diplomacy, while the other is gradually narrowing the gap through scale, time, and industrial reinforcement. The U.S. finds it difficult to rely solely on slogans and point restrictions against a competitor that possesses both strength and the speed of catching up.
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