China’s Struggle to Manufacture Advanced Semiconductors

SMIC is China's leading chip foundry. The company made leaps and strides by poaching experts, but U.S. restrictions on its supply chain have for now delayed progress.

Workers at a SMIC foundry. Photo from SMIC. Source.

Semiconductor Manufacturing International Corporation (SMIC) is the largest and most advanced chip foundry in mainland China. As of 2023, the company had 20,000 employees and ten facilities across four Chinese cities: Beijing, Tianjin, Shenzhen, and Shanghai, where the company is headquartered.¹ Whereas companies like Intel or Samsung both design and manufacture chips, SMIC only manufactures chips on contract, for “fabless” companies that only design chips. The leading foundry worldwide is Taiwan’s TSMC, which holds a dominant 62% share of global foundry revenue in 2024, in large part from manufacturing chips for companies like Nvidia and AMD.² Although SMIC’s global market share is just 6%, the company’s manufacturing capacity is growing rapidly, at 4.5 million 12-inch silicon wafers equivalent at the start of 2024, compared to TSMC’s 17 million.³ But SMIC lags behind TSMC in its capacity to produce the most advanced chips and U.S. trade restrictions in recent years have slowed SMIC’s progress further. As a result, as of 2023, 80% of SMIC’s $6 billion in revenue came from China itself, and the company is becoming a national champion focused on the growing domestic market rather than an international contractor.⁴