According to news on February 27, China’s mature process chip manufacturers and wafer manufacturers are violently impacting the global market with low prices. Western companies are unable to resist the pressure of oversupply and low prices. Industry analysts predict that chip manufacturing will usher in a "China shock", and some companies are already feeling an existential crisis.
Mature process chips usually involve processes above 20 nanometers and are the lifeblood of non-cutting-edge technology manufacturers in the semiconductor industry. This type of chip widely supports the consumer electronics and automotive fields, and its production and supporting wafer manufacturing provide important financial support for the R&D department of the entire chip industry.
By 2025, it will be more difficult for Western companies to compete with Chinese fabs, which are grabbing the market at prices far lower than Western companies. As U.S. sanctions have blocked Chinese companies from accessing advanced process technology and equipment, China has turned to focusing on developing mature processes to meet the needs of the technology industry. It is expected that by the end of 2025, Chinese wafer fabs will account for 28% of the world's mature process chip production capacity.
"Just two years ago, the 6-inch mainstream wafer produced by Wolfspeed, the world's leading silicon carbide wafer company, was still priced at US$1,500," a German chip manufacturer's sales director said in an interview. Today, products of the same specifications from Guangzhou Nansha Wafer Semiconductor Technology Co., Ltd. sell for just $500, and dozens of other little-known Chinese manufacturers offer ridiculously low prices.
The sales director likened the expansion of Chinese companies to a "brutal knockout round." He added: "We expect that many Chinese and foreign manufacturers will be hit hard. In fact, many companies have already collapsed, and eventually more companies will be forced to leave."
The former silicon wafer giant Cree is experiencing the pain of laying off 20% of its employees, and the company's stock price has fallen 96% in three years. Onsemi, a traditional American semiconductor company headquartered in Arizona, also announced that it will lay off 9% of its employees. Although these problems are not entirely due to strong competition from Chinese companies, the United States has publicly acknowledged that China's rapid rise in mature process chip manufacturing is impacting the U.S. industry.
The explosive growth of China's mature process chip industry has benefited from the strong support of the local government. The National Integrated Circuit Industry Investment Fund has raised 688 billion yuan (approximately US$95 billion) through three phases of fundraising, and local governments are also vigorously supporting local leading companies.
The massive expansion of China's chip industry has exposed Western companies to more competitors. China's share of the global mature process chip market is expected to increase from 28% to 39% in 2027.
Galen Zeng of market research company IDC said, "Driven by the localization strategy, Chinese manufacturers will expand production far more than their international counterparts in the next few years."
In 2023, China announced for the first time the acceleration of mature process production capacity. Mature process chips from China are having a comprehensive impact on the global chip industry, but the full impact remains to be seen.