> China's Semiconductor Self-Reliance Becomes Reality

As the technology cold war between the United States and China unfolds around semiconductors, Washington's powerful export controls were expected to deal a heavy blow to China's chip industry. Recently, however, the market has shown that U.S. sanctions are accelerating China's semiconductor self-reliance, instead providing an opportunity for the country to build its own artificial intelligence (AI) chip ecosystem.

There are three main reasons to keep an eye on the growth potential of China's semiconductor ecosystem. The first is explosive commercial AI demand. The recommendation algorithm of ByteDance, which operates TikTok, and Alibaba's AI-based logistics and cloud services have already become part of the daily lives of hundreds of millions of people. Because these services must process ultra-high-definition video and vast amounts of data in real time, large-scale AI chips are essential. The popularity of services based on China's enormous domestic market is directly translating into demand for Chinese semiconductors.

The second is technological progress in domestic AI chips and rising overseas exports. Despite U.S. sanctions, China has successfully developed high-performance AI chips approaching global leading levels one after another, including Huawei's "Ascend" and Hygon's "DCU." Chinese big tech's use of domestic chips is also expanding. On top of this, with a supply shortage of general-purpose (legacy) chips, Chinese companies are increasing exports mainly to emerging markets such as ASEAN and South America. In the first half of this year, China's semiconductor exports nearly doubled from a year earlier.

The last is large-scale, sustained investment in semiconductors. The Chinese government has launched the roughly 65 trillion won "Big Fund Phase III" to support the development of advanced semiconductors. ChangXin Memory (CXMT), China's largest DRAM maker, is pursuing a large-scale initial public offering (IPO), while Yangtze Memory (YMTC) is also preparing to go public. Massive government capital injections combined with huge private IPO funds are spurring aggressive facility investment, which in turn leads to improved performance and expanded market share for domestic chips.

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