From Reuters, June 13:
SHANGHAI/HONG KONG (Reuters) - Since the U.S. government put Huawei Technologies Co Ltd on a trade blacklist, effectively banning American firms from doing business with it, China’s leaders have spoken boldly about achieving self-sufficiency in the critical semiconductor business....MORE
But industry insiders are less optimistic that Chinese chip makers can quickly meet the challenge of supplying all the needs of Huawei and other domestic technology firms.
The prospectuses of Chinese chip companies preparing to list on a new tech-focused stock exchange are blunt, characterizing the domestic industry as “relatively backward”, lacking in talent and requiring “a long time to catch up”.
Chinese chip engineers tell tales of local manufacturing that just is not up to snuff, while analysts point out the many areas where China remains reliant on technology from the United States, Taiwan, South Korea, Japan and Europe, with some questioning whether government policies are in the right place.
“Compared to the constraints of equipment, materials, or talent, I think what China lacks more is understanding of the industry,” says Gu Wenjun, chief analyst at Shanghai-based consultancy ICWise. He called some of the government subsidies for the industry “counter-productive”, because too many well-funded ventures end up chasing the same talent.
Government appeals to patriotism also go only so far....
And from Bloomberg, April 29, 2018:
Why Can’t China Make Semiconductors?
After decades of failure, it may now be on the right track.
Jack Ma says he's ready for China to make semiconductors at home. It's a longstanding goal for the Chinese government. And thanks to a recent crackdown on certain technology exports by the U.S., it's now a critical one. The question is whether China can finally conquer this challenge after decades of failures.
Semiconductors are the building blocks of electronics, found in everything from flip phones to the servers that make up a supercomputer. Although China long ago mastered the art of making products with semiconductors produced elsewhere (the iPhone is the most famous example), it wants to move beyond being a mere assembler. It aspires to being an originator of products and ideas, especially in cutting-edge industries such as autonomous cars. For that, it needs its own semiconductors.
That's no small challenge. China is currently the world's biggest chip market, but it manufactures only 16 percent of the semiconductors it uses domestically. It imports about $200 billion worth annually -- a value exceeding its oil imports. To cultivate a domestic industry, the government has slashed taxes for chip makers and plans to invest as much as $32 billion to become a world leader in design and manufacturing. Yet as history shows, spending won't be enough.
China's earliest semiconductor was built in 1956, not long after the technology was invented in the U.S. But thanks to the turmoil of the Cultural Revolution, whatever momentum its engineers and scientists had was soon lost. When the country reopened for business in the 1970s, officials quickly realized that semiconductors would be a key part of any future market-based economy.
Almost from the start, though, central planning proved to be a serious impediment. Early government ideas included importing secondhand Japanese semiconductor lines that were outdated before they were even shipped. Expensive efforts to build a domestic industry from scratch in the 1990s faltered due to bureaucracy, delays and a lack of customers for the kind of chips China was making.
Another weakness was a lack of capital. For decades, labor-intensive industries -- such as assembling mobile phones -- were the route to riches in China, attracting investment from entrepreneurs and bureaucrats alike. Making semiconductors, by contrast, requires billions in up-front capital and can take a decade or more to see a return. In 2016, Intel Corp. alone spent $12.7 billion on R&D. Few if any Chinese companies have that capacity or the experience to make such an investment rationally. And central planners typically resist that kind of risky and far-sighted spending........MUCH MORE
