In this video, David Oualaalou examines whether China can develop a self‑sufficient semiconductor industry despite a massive government stimulus and escalating U.S. trade restrictions. He outlines Beijing’s ¥1 trillion (≈$143 billion) five‑year plan that subsidizes 20 % of equipment costs and offers tax breaks for chip assembly, packaging, and R&D, aiming to accelerate domestic fab capacity. Oualaalou then details the U.S. response: export controls that block advanced lithography machines—particularly from Dutch firm ASML—and bans on Nvidia and AMD selling high‑end processors to Chinese customers. He contrasts the technological gap, noting SMIC’s reported 7‑nm chip versus TSMC and Samsung’s 3‑nm production, and questions how quickly China can close this gap without access to cutting‑edge tools. To illustrate the possibility of rapid, home‑grown high‑tech achievement, he draws a parallel to China’s swift completion of the Tiangong space station (April 2021–Nov 2022). He argues that containment strategies, such as the crackdown on Huawei, may backfire and inadvertently spur Chinese innovation. The video concludes by asking viewers whether China will ultimately dominate the semiconductor sector and invites comments, emphasizing the broader geopolitical impact of these tech battles.
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Hello everyone and welcome to Geopolitical Trends. My name is David Oualaalou. Can China support its own semiconductor sector? In this video, I am going to provide you a brief analysis to help you acquire the full picture about this topic. If you are interested in wanting to learn, be informed, and be ahead make sure to watch this video to the end. Also, if you like to— if you like the content of my videos and want to support this channel, consider becoming a member. And of course, if you are new to this channel, please make sure to hit the subscribe button because I am on a mission to help as many people around the world as possible become aware And I can only do this if you are subscribed, and don't forget to hit the like button because that motivates me to create more content for you. So thank you for your support. Let's dive in into this topic here. Looks like the new government incentives in Beijing have rolled out that it will see China join the US in offering significant fiscal package to support domestic chip production. Under the plan, China will invest about ¥1 trillion, the equivalency of about $143 billion, in its chip industry over 5-year period. And this period will be with the focus on advanced manufacturing. Much of the funding of this, of course, will be available for purchase of domestic semiconductor equipment for chip-producing foundries known as fabs in the tech world, or jargon that is. And companies, uh, based on the research that I found, companies will be entitled to a subsidy of about 20% on the cost of equipment. It's not a bad deal, it's not a bad investment either. So, and here's the thing, Chinese companies will also receive tax breaks for investing in the assembly, packaging, and R&D of chips. So you can just see the Chinese government is pushing full speed with ramping up this chip production at home so they won't have to worry about, uh, the outside world or supplies from outside. So looks like the government in Beijing is really under pressure to boost domestic capability because of what the United States government did. Well, what did the US do? The US ramped up the China semiconductor trade war in recent months. You know, how the US did that is by using the export control to restrict the supply of, uh, vital lithography machines, which is very, very specific for the microchip production, in addition to other equipments used in the chip making industry, that is, you know. And of course, the US government also banned US firms such as Nvidia and AMD from selling their advanced processors to China clients. So now this one begs the question whether the investments will help China develop its own advanced chip more quickly is debatable because the microchip industry, uh, uh takes time, takes research, takes, uh, certain skills and so forth. Now, can China do it? Will China be able to do it? And I'm gonna give you an example why that possibility is there. So, and here's the thing, one thing it's for sure with certainty is that without access to technology or leading-edge lithography technology, mainly the ones supplied by one particular country in Europe And that country is Dutch, or Netherlands, that is. There is a company there called ASML. It's very specialized in this very leading-edge lithography technology. So, well, this company, the ASML, has been banned by the US, even though it's a Dutch company, banned from selling its most advanced machines to Chinese clients. Yeah, domestic chip makers are unable to match— domestic chip makers in China will be unable to match the manufacturer capabilities of the like of, for example, the Taiwan Semiconductor Company, TSMC, and the Samsung in, in South Korea, which are both, by the way, both of those companies, TMK TSMC and Samsung are developing small efficient chip about 3 nanometers based on the last research that I looked into. And those are the 3 nanometer process node which is, are used in smartphones and in servers. So, so those are very, very specialized stuff. But again, I'm, I learned from history and I learned from trends. And I'm going to provide you an example here to put things in perspective. That's why I said at the beginning we'll provide you the full picture. You all remember when China launched, uh, successfully launched a few months ago the, uh, the final module of its Tiangong— Tiangong, I'm sorry— space station, which was back in November 2022, if I'm not mistaken. So the space station completion led some US officials to even state and believe that China has already surpassed US in some aspects of space technology. Yeah, this is why you need to put this within the context of this microchip thing that China now is embarking on, which some in US said, oh, China will not be able to do it. Look what happened in the space station up there. You know, when China was banned from accessing space station, they went ahead and built their own, and it's completed. Could they replicate this in the microchip? That is why I wanted to address this with you, to highlight, to bring you, to make you aware of this, because it's not been reported aggressively here in the West. So, so the completion of the Tiangong space station came about a year and a half— get this, guys— only in a year and a half after China launched its first portion of the station known as, uh, let me get the name here, Tianhe. I hope I pronounce it correctly. Uh, on April 2021, within a year and a half, China completed the space station. So it's common sense. You're gonna think in terms of, you know, can China do it again, something like this, in the microchip sector? Possibly, possibly, possibly, possibly not. But the thing is, Chinese manufacturers have been investing in older process node technology in recent years. And here is the thing. China's biggest chipmaker, it's called SMIC or SM, SMIC, reportedly built a 7-nanometer chip earlier this year. So, so this came as a surprise to many people outside China. It indicates that the Chinese company is still, even though with that 7 nanometer is still far the distance behind its foreign rivals. 'Cause remember, the one in Samsung and TSMC are able to build 3 nanometers. So here's my conclusion for you. When China unveiled its sort of Made in China 2025 strategy, it became clear to the Western world that China will never be satisfied to serve solely as the world factory, mostly producing non-Chinese products for foreign companies. Of course, this freaked out much of the Western world, as well as even some Asian nations, uh, uh, uh, that realized that, well, China's rising tech companies could display their own currently global dominant tech companies. Those are for some other Asian nations and the West, of course. So the envisioned solution, shall we say, to the problem based on Western views is that to deprive the Chinese economy of many key technological inputs that would basically create a bottleneck effect. And again, use the example of Huawei. So the brutal takedown of Huawei seemed to confirm the effectiveness of such strategy. As we can see now, it may also have backfired. Even though it may have slowed down China's plan for a few years, end up backfiring. Could this happen with the semiconductor when the US, President Biden that is, decided to embark on a full trade war with China regarding microchip? Could this backfire and China might end up developing its own? Once again, the space station is an example. So, so here's my question for you for today. Do you think China will prevail in dominating the semiconductor sector? Let me repeat. Do you think China will prevail in dominating the semiconductor sector? Make sure to leave me some comments. I like to read your feedback. As always, remember, geopolitics impacts your daily life in more ways than one. Till next time, guys, bye-bye.
