Why China Can’t Fix the Global Microchip Shortage

Why China Can’t Fix the Global Microchip Shortage

Why can't China step in to fill the chip shortage? The vaunted factory floor of the world has flooded the global economy with goods, and has often had to deal with domestic oversupplies itself. Why then has it been largely on the sidelines of the debate over solving the worldwide semiconductor shortage?

The stark reality is that, when it comes to chips and chipmaking machinery, China just can't produce what the world needs. Its self-sufficiency in semiconductors remains low: It exports about $100 billion worth of chips but imports more than $300 billion. Meanwhile, China makes 28% of the semiconductor production equipment required by chipmakers, according to HSBC Holdings Plc. estimates.

The chip foundries and production lines that have been set up in China require imported machinery. Last year, $13.7 billion of semiconductor equipment came in from overseas, up over 30% from the year before. The shortage of such machines is so severe that used ones from Japan are making their way to China, pushing prices up sharply.

The country has been able to make some progress, especially in low-end processes of the multi-step chipmaking procedure, but it is still decades away from more complex operations. The likes of Shanghai-based Semiconductor Manufacturing International