China's Subsidies Expand Legacy Chip Production, Stoking US and EU Fears

SMIC
(Image credit: SMIC)

In response to U.S. restrictions on China's access to advanced chip production technologies, Chinese companies began to invest in the expansion of production capacities that process wafers using legacy nodes, such as 28nm, 45 nm, and older. This has raised concerns in the U.S. and Europe about China potentially flooding the market with mature chips, thus driving competitors out of business and then using chips as leverage, leading to discussions on further restraining China's influence in the semiconductor sector, Bloomberg reports.

The expansion of capacities capable of making chips on 28nm, 45nm, and older technologies, as well as various specialty nodes by companies like Semiconductor Manufacturing International Corp. (SMIC) and Hua Hong, is making American and European officials nervous. Older chip fabrication technologies are still critical for various industries, which is why politicians fear that chips made on mature nodes might become a strategic advantage for China, which raises significant security risks.

U.S. Commerce Secretary Gina Raimondo expressed concerns over China's large-scale investments in legacy chip production capacity, highlighting the importance of cooperating with allies to address this challenge. The European Commission emphasized its goal to minimize Europe's reliance on foreign companies for both advanced and legacy chips.

Chinese companies are rapidly constructing new facilities, with projections indicating the establishment of 26 new fabs by 2026. Despite the political friction between the U.S. and China, Chinese firms, such as SMIC, have maintained their supply chains, with a significant portion of their sales coming from U.S. clients, according to Bloomberg.

Anton Shilov
Contributing Writer

Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.