China's Chip Foundry Prices Plunge as Production Capacity Fully Opens Up
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In 2023, China's chip production capacity will reach about 30% of the global total; reports suggest that within three years, China will account for 39% of global chip production, with advanced process chips making up 8% and mature process chips around 31%. In the future, China's chip production capacity will significantly increase, and chip prices will become 'as cheap as cabbage.'
Dozens of chip factories under construction in China have already begun full-scale production. It is estimated that by 2023, China's chip production capacity will reach 29% of the global total, and by 2027, it will exceed 30% of the global market share.
With the continuous expansion of chip production capacity, Chinese chips are bound to enter the international market. As a latecomer, the only weapon is low prices, which is also why Chinese-produced chips can quickly expand globally.
Chinese manufacturing has demonstrated formidable strength across various sectors. During the era of VCRs, China swept the global market with cheap VCDs, ending the VCR era. Later, Europe, Japan, and South Korea attempted to reclaim market share with advanced DVD technology, but they were soon undercut by China's low-cost DVDs. Eventually, these regions formed a DVD patent alliance to impose high patent fees and suppress China's DVD industry. Subsequently, knockoff phones, domestic smartphones, and domestic televisions emerged one after another.
This shows that the 'low-price' strategy is undoubtedly the most important reason for the tremendous success of 'Made in China.' Of course, low prices do not necessarily mean poor quality—products like televisions and mobile phones, for example. Although Chinese brands are priced lower, their quality is excellent, even comparable to industry giants like Samsung and LG. This is the biggest competitive advantage of Chinese manufacturing.
The chip industry is no exception. Although TSMC's advanced process technology has impressed the global chip industry, analysts point out that only 30% of global chips are below 7nm, while the remaining 70% are mature chips. This presents an opportunity for China's chip market.
China is already capable of mass-producing 28nm process chips, and within three years, it will be able to mass-produce 7nm process chips. By then, China will occupy over 70% of the global chip market share. In recent years, China has made substantial progress in multiple fields such as memory, analog technology, and automotive chips. These chips feature mature processes, meet industrial demands, and perform well. Companies like Volkswagen and American appliance manufacturers are highly satisfied with Chinese chips and actively adopting them.
Recently, reports indicate that Chinese chip manufacturers are aggressively entering the foundry market, using low prices to capture market share. This has forced foundries like Samsung to reduce prices to maintain their market positions, highlighting the strong competitive edge of China's chip manufacturing industry.
In fact, similar to 'Made in China,' the Chinese chip market is focusing on the mid-to-low-end segment, which offers two advantages.
On one hand, as revenue in foreign chip industries declines, the pace of technological upgrades will slow, giving China time to narrow the technological gap. TSMC has already announced plans to reduce investments this year, while the R&D costs for advanced processes continue to rise, making development increasingly challenging.
Under these circumstances, China may accelerate its efforts to catch up with foreign chip technologies and even surpass them in the future.
Due to China's rapid rise in chip manufacturing, foreign media claim that the chip market is heading toward 'cabbage prices' (extremely low costs). Foreign chip manufacturers, accustomed to high profits, are now worried—China's pricing strategy is already evident, raising concerns that the industry may follow a similar trajectory.