In recent years, China has made remarkable progress in the field of integrated circuits, showcasing its growing strength and innovation capabilities. Just a short while ago, Huawei released the world's first 10-nanometer AI chip, marking a significant milestone in the industry. At the same time, domestic third-generation Beidou chips have achieved sub-meter positioning accuracy and advanced chip-level security encryption. Moreover, supercomputers equipped with homegrown chips have secured three consecutive global championships in the supercomputing domain. These developments reflect China’s rapid advancement in catching up with global leaders in semiconductor technology.
Despite this progress, there remains a critical challenge: the lack of core technological independence. A few years ago, China's telecommunications network, internet, and electronic manufacturing sectors ranked among the largest globally. However, the gap between scale and strength was evident. The most pressing weakness was the absence of core components—particularly integrated circuits. For years, China has been the world's largest importer of chips, spending over $200 billion annually on imports, far exceeding oil imports. In 2015 alone, China accounted for one-third of the global chip market, yet over 95% of the supply came from foreign companies.
The integrated circuit industry is not just strategic—it is foundational and forward-looking. It plays a crucial role in driving the digital economy and holds a central position in information technology. Recognizing this, President Xi Jinping has repeatedly emphasized that "core technologies are our biggest vulnerability." He warned that even if a company is large or highly valued, reliance on foreign components could put its "life gate" in others' hands, likening it to building a house on someone else’s wall. To address this, China must focus on independent innovation in key technologies and accelerate the development of secure, domestically controlled systems.
To implement these goals, the State Council launched the "Outline for Promoting the Development of the National Integrated Circuit Industry" in June 2014, aiming for leapfrog growth in the sector. This was followed by the establishment of a massive fund, supported by 15 major companies, including Guokai Finance, China Tobacco, and China Mobile. With an initial size of 120 billion yuan, the fund raised nearly 140 billion yuan, and local governments also contributed over 200 billion yuan in development funds. Over the next decade, China is expected to invest more than 100 billion yuan into the integrated circuit industry.
The influx of policy and financial support has significantly accelerated the pace of development. By 2016, the National Integrated Circuit Industry Investment Fund had made 40 investments totaling around 70 billion yuan, with 60% directed toward semiconductor manufacturing. As a result, sales in China's integrated circuit industry reached 433.55 billion yuan in 2016, showing a 20.1% year-on-year increase. High-end chip design, in particular, saw a 24.1% growth, with companies like Ziguang and Hass ranking among the top ten globally. Chinese firms now occupy 11 spots among the top 50 global chip designers.
Ziguang, as a leading player in the industry, has benefited greatly from the big fund. Its parent company received 30 billion yuan in investment from the National Integrated Circuit Fund and the China Development Bank in 2015, and another 150 billion yuan in financing in 2016. This capital infusion enabled Ziguang to expand rapidly through acquisitions and mergers. The company aims to surpass MediaTek within five years and become the world's second-largest chipmaker. Ziguang is also investing heavily in 5G research, with a team of hundreds working on next-generation chips set to launch in 2018.
Beyond design, packaging and testing are also advancing. Changjiang Electronics acquired Singapore-based Starcoop for 780 million yuan, becoming the world’s third-largest packaging and testing company. In wafer manufacturing, the Yangtze River Storage Group was established in 2016 with a 160-billion-yuan investment in Wuhan. The group focuses on 3D flash memory, aiming to reach 300,000 units per month by 2020 and 1 million by 2030.
Since the establishment of the IC Fund in 2014, China has invested heavily in building a strong chip industry. As Ding Wenwu, president of the National Integrated Circuit Industry Investment Fund, stated, "This road is getting closer and closer, and our ideals are becoming reality." With continued investment and innovation, China's ambition in the chip industry is becoming increasingly attainable.
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