When it comes to chips, due to well-known reasons, the industry has focused on chip manufacturing processes. However, by deploying mature processes, China's chips have taken the global lead in production capacity and exports this year. Coupled with China's position as the world's largest chip market, it can be said to be a triple threat.

In terms of production capacity, the top three global chip production capacities in 2023 were South Korea, Taiwan, China, and Mainland China, accounting for 22.2%, 22%, and 19.1% respectively. The gap between Mainland China and the top two is not significant.

In the first four months of this year, China's chip production capacity increased by 37% year-on-year, while South Korea and Taiwan, China have only been able to maintain single-digit growth for several consecutive years. Under such circumstances, China's chip production capacity is likely to surpass South Korea and Taiwan, China this year and rank first globally. Additionally, China has dozens of wafer fabs under construction, with more than a dozen set to enter mass production this year, which will also significantly increase production capacity.

China has always been the world's largest chip buyer, and of course, it is also the world's largest chip importer. However, what the industry may not have noticed is that China's chip exports are also significant. In 2023, China's chip exports accounted for 26% of global chip exports.

In the first five months of this year, China's chip exports increased by 25.5% year-on-year. At this growth rate, China's chip exports are likely to exceed 30% of global chip exports this year, making China the world's largest chip exporter.

Advanced processes are undoubtedly important for chips, but chips are diverse. In addition to mobile phone, PC, and server chips, the global demand for mature process chips is even greater. Analysis indicates that chips with processes above 14 nanometers account for over 70% of global chip production, while chips with processes above 7 nanometers account for 90%.

China has achieved large-scale mass production of 14-nanometer processes, and 7-nanometer processes are estimated to have reached a certain scale. The 5G chip of a Chinese mobile phone company is believed to have adopted domestically produced 7-nanometer processes. Currently, China's chip industry is steadily increasing production capacity for 14-nanometer and 7-nanometer processes, which can enhance the competitiveness of Chinese chips and increase their share in the global chip market.

NVIDIA is the star of the US chip industry, with leading AI chip performance. However, AI chips produced by Chinese chips using 7-nanometer processes have become highly competitive. It is rumored in the industry that two Chinese AI chip design companies' AI chips have overly advanced performance. In order to comply with US requirements for TSMC to produce chips for Chinese mainland chip companies, these two AI chip companies had to reduce the chip's performance to meet the relevant requirements and hand them over to TSMC for production. This demonstrates the strength of China's chip design.

China's mature process chips have demonstrated strong competitive advantages. US home appliance manufacturers believe that Chinese chips have reached the level of US chips, so they strongly demand the use of Chinese home appliance chips. Currently, Chinese drones, which are popular due to global environmental factors, can actually meet requirements using mature process chips, thus driving the export of Chinese chips.

This proves that China's decision to first develop mature process chips on a large scale in recent years was the right approach. Relying on mature chips, it has fostered a domestic chip industry chain and technical talent. After accumulating sufficient technological advantages, it has moved towards the development of advanced process chips. Meanwhile, Chinese chips have generated more revenue, which will provide support for the research and development of advanced technologies for domestic chips, thus forming a virtuous cycle.

In contrast, as China's chips grab more revenue, overseas chips will see reduced income, leading to a decline in their innovation capabilities and a slowdown in innovation progress. This provides time for Chinese chips to narrow the gap. TSMC, for example, has planned to reduce its capital expenditure this year, while the development of advanced processes requires more funds. Therefore, their slowdown in advanced technology research and development is inevitable.