The Chip War Is Nearing Its End as China Chips In

According to data from China’s customs, between January and October 2024, the country exported chips worth 931.1 billion RMB, which is about $128 billion. Obviously, the figure is on track to exceed 1 trillion RMB, which is about $138 billion. For many, this figure is staggering, but its implications are even more profound.

The chips produced are first used domestically to meet internal demand, and only then are they available for export. China has long been the world’s largest semiconductor market, importing about $300 billion worth of chips annually. The fact that China is now poised to export over $138 billion worth of semiconductors suggests that its chip production has more than doubled this figure, allowing the country to meet internal demand.

According to Semiconductor Industry Association (SIA), global chip sales for 2023 stood at $526.8 billion. To put this in perspective, even if the global market grows to $600 billion in 2024, nearly half of the world’s chip would be produced in China. And at this pace, 70% of global chip production could come from China by the end of 2026.

Despite various challenges China’s chip industry faced between 2021 and 2023, the sector has entered a phase of rapid expansion, with annual growth exceeding 20%.
This momentum is unlikely to slow down. In fact, most of China’s chip factories began construction in 2021, with many completed by 2022 to early 2023, when they started trial production with small batches. In 2024, these facilities are gradually ramping up to full-scale production. Additionally, many newly built chip factories are still coming online in 2024. That means even more advanced facilities are expected to begin production in 2025.

A worker at a semiconductor fab in Binzhou, Shandong province, China.

Moreover, China’s chip market saw a 10% decline in chip imports in 2023, and it is expected that this figure could further decrease by 10–15% in 2024. Over time, the market is expected to reach a balance, with China’s chip exports growing at an annual rate of 20%, while chip imports decline by 20% annually.

Today, China’s chip manufacturing capabilities are unmatched globally. Most of its chip factories were constructed in the past three years, and they boast far superior design, management, and process standards compared to factories built years or even decades earlier. These new facilities also leverage higher levels of intelligent management, leading to greater efficiency, higher production output, and lower production costs.

China has already established a complete chip supply chain, including design software, production equipment, chip design, wafer manufacturing, chip packaging, testing, materials, and industrial gases.

Additionally, the competition among dozens of chip factories within China is driving prices lower and improving quality. This intense internal competition is a key factor behind the rapid growth of Chinese chip products in global markets.

By 2026, competition in chip manufacturing is expected to extend into advanced manufacturing technologies. By 2028, China is highly likely to account for roughly half of the world’s output in advanced chip production.

Despite no official announcement from the Chinese government or state media, the reality is that China has become the world’s largest chip manufacturer, holding half of the global chip production capacity.

Today, U.S. think tanks and media are beginning to reflect on the failure of America’s tech war against China. In the next three years, it is likely that the U.S. will start accusing China of chip overcapacity, alleging severe disruptions to the global chip market. At the same time, the U.S. government is likely to blame China for halting chip imports from America, while demanding that the Chinese government allow its firms to resume purchasing U.S. chips.

HR 4346, the Chips and Science Act of 2022, is displayed after it was signed by US President Joe Biden. The act aims to both strengthen American supply chain resilience and counter China.

By around 2028, the so-called “chip war” may come to an end, with China emerging as the dominant force in the global chip industry. In contrast, the prospects for the U.S., Japan, and South Korea seem far less promising.