China’s chip output may double in five years, Barclays says
China's chipmaking capacity will more than double in five to seven years based on local manufacturers' existing plans, "materially more" than the market expects, according to research from Barclays analysts.
Most of that additional production capacity could be added in the next three years, based on an analysis of 48 chipmakers with fabrication plants in mainland China, the research showed.
"Local players are still underappreciated," analysts including Joseph Zhou and Simon Coles said in the note on Thursday. "There are materially more local semiconductor manufacturers and fabs in China than suggested by mainstream industry sources."
China is working toward technological self-sufficiency, something that's become more difficult after the US and some of its allies restricted what tech companies were allowed to sell into the Asian country. Chinese firms have accelerated purchases of vital chipmaking tools to support the ramp-up and to build supplies ahead of new bans.
Keep updated, follow The Business Standard's Google news channel
Leading chip gear producers, including the Netherlands' ASML Holding NV and Japan's Tokyo Electron Ltd., saw an inrush of orders from China last year.
Most of the additional capacity will go to producing chips using older technology, the analysts said. These legacy semiconductors — at 28 nanometers and above — are at least a decade behind the most advanced chips, but are widely used in systems such as home appliances and automobiles.
These chips could theoretically cause an over-supply in the market, the Barclays analysts said, though "we see this as at least some years away, likely 2026 at the earliest, and dependent on the quality achieved as well as any new trade restrictions."
China's ambition in legacy semiconductors has drawn attention from the US Commerce Department, which plans to gather information on how deeply reliant US firms have become on the technology from China. Bloomberg News reported in December that the US could impose tariffs or other trade restrictions to counter China's push.
