An $11 billion distraction for China's chip ambitions

COMMENTARY / World

An $11 billion distraction for China’s chip ambitions

Writing big checks to fund timid moves won’t make the nation a semiconductor powerhouse

Workers check their face masks before entering the clean room of a Chinese semiconductor plant in Shanghai. Spending $11 billion on huge factories to churn out generic parts won’t bridge the gap between SMIC and TSMC. | REUTERS

By Tim Culpan
Bloomberg

Sep 13, 2021

Year after year, we hear about China’s ambitions to become a leading contender in the global chip race. Yet time and again its companies and government make decisions that seem destined to ensure the nation remains an also-ran.

Latest among the befuddling choices is the Shanghai government signing on to own up to 25% of a massive new factory that Semiconductor Manufacturing International Co. intends to build. The $8.9 billion budget for this facility adds to a $2.35 billion plant that SMIC is already planning 800 miles south in Shenzhen. That earlier project will also be minority held and funded by the local government.

What’s astounding about these plans is that they’ll create a huge amount of manufacturing capacity for technologies that are more than a decade old. Both the Shanghai and Shenzhen fabs will be dedicated to 28-nanometer nodes and above, the kind used for less energy- and resource-sensitive applications such as controlling electric windows or running windshield wipers. By comparison, world leader Taiwan Semiconductor Manufacturing Co. is making chips for Apple Inc. and Intel Corp. at 5 nanometer, and will introduce the even more advanced 3nm next year.