How China’s Shift to Legacy Chips Is Reshaping the Semiconductor Landscape
With U.S. export controls limiting access to advanced chipmaking equipment, Chinese manufacturers are pivoting to dominate the production of legacy chips—critical for everything from appliances to military systems. By 2023, Chinese firms accounted for 29% of ASML’s equipment sales, nearly doubling their share from the previous year, and now represent almost half of ASML’s current revenue. Similarly, KLA, Lam Research, and Applied Materials reported that 37-43% of their revenue came from China. As Chinese manufacturers ramp up capacity, U.S. Commerce Secretary Gina Raimondo highlighted that 60% of all new legacy chips in the next few years are projected to be produced in China. This trend poses a dual challenge: expanding export controls risks undermining Western equipment manufacturers’ profitability while leaving the controls as-is exposes Western legacy chipmakers to intense price competition, echoing China’s impact on industries like solar panels. China’s aggressive expansion in solar panel production, supported by over $40 billion in government subsidies, led to global oversupply, driving prices down by 80% between 2008 and 2013 and forcing dozens of Western competitors into bankruptcy. The U.S. now faces a critical choice as it crafts policy to address this growing imbalance on legacy chips.
My Take
The U.S. and its allies must explore public-private partnerships to strengthen domestic legacy chip capacity. A dual approach to incentivizing local production while maintaining strategic export controls will mitigate risks and sustain technological leadership.
#Semiconductors #ChipIndustry #ExportControls #TechnologyLeadership #Geopolitics #LegacyChips
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Credit: MSN, Barrons
This post was enhanced with AI assistance, thoroughly reviewed, edited, and reflects my own thoughts.