Barclays analysts said in a latest research report released on Thursday that based on the existing plans of China's local manufacturers, China's chip production capacity will more than double within five to seven years, "significantly exceeding" market expectations. Research shows that most of the new capacity will be completed within the next three years, based on an analysis of 48 chip manufacturers with manufacturing plants in mainland China.
Barclays analysts including Joseph Zhou and Simon Coles wrote in a report on Thursday that local Chinese companies still have not received enough attention. The number of local semiconductor manufacturers and fabs in China is far greater than current estimates by mainstream industry figures.
Despite multiple restrictions from the United States and its allies, China is still overcoming numerous obstacles in its efforts to achieve self-sufficiency in the semiconductor field. In recent years, Chinese companies have accelerated the purchase of important chip production equipment to support production capacity improvements. Semiconductor equipment manufacturers, including ASML of the Netherlands and Tokyo Electronics of Japan, have received a large number of orders from China in 2023.
Analysts at Barclays said that most of China's new capacity will be used to produce chips with mature processes. Although these mature process chips (28 nanometers and above) are at least ten years behind the most advanced process chips, they are widely used in systems such as home appliances and automobiles and are still indispensable.
Barclays pointed out that "these chips could theoretically create an oversupply in the market, but we think it will be at least a few years before this happens - possibly as early as 2026, and it will also depend on the quality achieved and whether there are any new trade restrictions."
At present, most manufacturers in the semiconductor field are still focusing on expanding production of mature processes. After all, this market accounts for more than 75% of the overall chip market. Advanced process (below 28 nanometers) technology is only in the hands of some manufacturers, and the demand is not as big as imagined. Currently, only CPUs, GPUs, mobile phone SoC chips, etc. must use these advanced processes.
According to a recent report released by the International Semiconductor Industry Association (SEMI), after the monthly wafer production capacity of the global semiconductor market increased by 5.5% to 29.6 million pieces in 2023, it is expected to further increase by 6.4% in 2024, exceeding the 30 million piece/month mark for the first time.
Among them, Chinese companies are expected to lead this wave of expansion. SEMI noted that China's share of global semiconductor production is expected to increase, driven by government funding and other incentives. Mainland China's semiconductor manufacturers' production capacity will increase by 12% year-on-year in 2023, reaching 7.6 million wafers per month. It is expected that mainland China's chip manufacturers will launch a further 18 projects in 2024, with production capacity increasing by 13% year-on-year in 2024, reaching 8.6 million wafers per month.