Mapping China’s semiconductor ecosystem in global context: Strategic dimensions and conclusions

Executive Summary

Historically, the semiconductor value chain has flourished thanks to transnational divisions of labor that supported high levels of economic efficiency and innovation. As a result, interdependencies throughout this value chain exist between different regions around the globe. The US-China technology rivalry, the COVID19 pandemic and global shortages in semiconductors have led many governments to scrutinize these interdependencies in the transnational semiconductor value chain. The US government for example has completed a review of the semiconductor supply chain. Europe’s new industrial strategy focuses on assessing and managing strategic dependencies in different technology ecosystems, including semiconductors.

China’s capabilities in the semiconductor value chain play a key role in these considerations. China’s government is making great efforts to raise the competitiveness of Chinese industry in the semiconductor sector, building on and supporting China’s role in global electronics manufacturing and emerging technological ecosystems. With growing strategic concerns in the US and Europe about China, a better understanding and systematic assessment of China’s capabilities in producing semiconductors is needed. What is the position within the semiconductor value chain of Chinese companies? In which areas is China highly reliant on foreign technology providers? How likely is China to catch up within this decade in a particular production step?

This report provides a framework for assessing the national interest vis-à-vis China’s role in the semiconductor value chain. We draw conclusions across three strategic dimensions – industry competitiveness, national security and resilience of the global supply chain – that impact the interests of all nations, given the importance of semiconductors in the modern world. Understanding China’s role throughout the value chain in terms of these strategic dimensions helps policy makers to identify current and future interdependencies with China, and to balance or prioritize between competing interests. With this picture, European decisionmakers are better equipped to best position EU countries for a world in which technological interdependence is increasingly contested, weaponized and fraught with national risk.