China's 10-Year Semiconductor Self-Reliance Battle: 7 nm Supply Shortage Falls from 92% to 34%

[Financial News] China, which is accelerating efforts to achieve semiconductor self-reliance in response to the United States' technology blockade, is expected to sharply reduce its dependence on overseas suppliers for advanced chips over the next 10 years. Analysts say the country's semiconductor self-sufficiency is taking shape as SMIC expands foundry capacity and CXMT rapidly scales up memory production.
According to Caixin Media and the South China Morning Post (SCMP) on the 25th local time, Goldman Sachs said in a recent report that China's shortage of wafers for advanced 7 nm process and below nodes will fall from 92% last year to 34% in 2035.
By 2035, China's demand for wafers used in advanced processes is projected to reach 619,000 per month, while supply is expected to reach 410,000. From 2025 to 2035, domestic supply is forecast to grow at an average annual rate of 46%, far outpacing demand growth of 17%.
Leading that expansion is China's largest foundry, Semiconductor Manufacturing International Corporation (SMIC). Goldman Sachs expects SMIC's advanced wafer production capacity to increase by 30,000 to 50,000 wafers a year between 2026 and 2031. Its yield is also projected to rise from 23% this year to 50% in 2030 and 75% in 2035. Despite U.S. restrictions on advanced semiconductors, SMIC produced the 7 nm chip used in Huawei smartphones in 2023.
Investment is also set to grow. China's semiconductor capital expenditure is expected to rise by an average of more than 10% a year, reaching $82 billion in 2030, or about 113.6 trillion won. That is 79% higher than Goldman Sachs' estimate from a year earlier. Rising demand for artificial intelligence (AI) semiconductors and the buildout of domestic supply chains are driving the investment.
Momentum is also building in memory chips. Goldman Sachs said ChangXin Memory Technologies (CXMT), which raised funds through a recent initial public offering, could supply about 50% of China's DRAM demand and 40% of its high-bandwidth memory (HBM) demand on its own by 2028. CXMT's current monthly production capacity is about 300,000 wafers, but that could rise to more than 600,000 once new plants are completed.
However, the technology gap remains. Goldman Sachs said CXMT is still two to three generations behind Samsung Electronics and SK hynix. U.S. export controls on advanced equipment, including Extreme Ultraviolet Lithography systems, remain an obstacle to narrowing that gap. Foundries also continue to rely on ASML for advanced deep ultraviolet (DUV) lithography equipment.
Goldman Sachs said it sees little chance of a meaningful narrowing of the technology gap between China and global DRAM makers in the near term. Even as China's self-sufficiency rate rises quickly, it will still have to rely heavily on overseas companies such as Samsung Electronics and SK hynix for advanced products.

[email protected] Kim Kyung-min Reporter