China is showcasing its technological advancements in response to United States restrictions on semiconductor exports.

During a government-organized press tour in Jiangsu and Zhejiang provinces, executives from Chinese tech firms highlighted their ability to innovate without relying on American chips.

Magiclab Robotics Technology, based in Suzhou, reported that over 90% of its humanoid robot components are developed domestically.

The firm sources the remaining parts, including semiconductors, from local and international suppliers, avoiding US technology.

Firms on the tour, representing sectors like robotics, biotechnology, and artificial intelligence, echoed the theme of self-reliance.

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🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ China’s semiconductor self-sufficiency accelerated by necessity, not choice

China’s journey toward semiconductor independence began decades ago but has intensified dramatically in response to US restrictions.

The country’s push started in the 1950s but gained serious momentum after economic reforms in the late 1970s, evolving from basic capabilities to today’s advanced ambitions 1.

This trajectory took a decisive turn with the Made in China 2025 initiative, which set an ambitious goal of 70% semiconductor self-sufficiency by 2025, a target that remains challenging despite massive investment 1.

The intensity of this push is evident in capital expenditure figures: China now accounts for one-third of global semiconductor investment, marking a 28% increase from the previous year and approximately five times greater than in 2012 2.

While Chinese firms have made significant strides in chip design and manufacturing through companies like HiSilicon and SMIC, they continue to face substantial challenges in developing advanced processes without access to cutting-edge Western technology 1.

This explains why Chinese executives on the government-organized tour emphasized capabilities in sectors that don’t require the most advanced chips, while downplaying dependencies that persist in cutting-edge AI and semiconductor technology.

2️⃣ Economic interdependence creates complex leverage on both sides

The evolving tech standoff occurs against a backdrop of unprecedented economic integration, creating leverage points for both nations that complicate the conflict.

US-China trade volume grew from just $4.7 million in 1972 to $536.2 billion by 2012, making China the largest trading nation globally and the US its largest export market 3.

This economic entanglement explains why rare earth magnets have become Beijing’s counter-leverage against US export controls – China can selectively restrict access to materials critical for everything from wind turbines to jet planes, forcing concessions from Washington 2.

The asymmetric nature of this interdependence is evident in pricing dynamics: Chinese semiconductor firms can offer prices over 30% lower than non-Chinese competitors for certain chip products, enhancing their market share and creating concerns about market saturation 2.

This pricing advantage, combined with China’s accelerating investments in domestic capacity, has prompted warnings from the US Select Committee on the Chinese Communist Party about urgent action needed on “foundational chips” (28nm or larger) 2.

As President Xi emphasized in a recent address, technological self-reliance has become central to China’s national strategy, with the goal of securing China’s position in global sci-tech competition by 2035 through partnerships with 161 countries and 117 bilateral agreements 4.

3️⃣ The emerging bifurcation of global technology ecosystems

US restrictions are inadvertently accelerating the development of parallel technology ecosystems, potentially reshaping the global innovation landscape.

Paradoxically, US sanctions have intensified China’s focus on developing independent capabilities in strategic sectors like AI, semiconductors, and robotics, which is contrary to the intended goal of export controls 5.

The semiconductor industry illustrates this bifurcation: China plans to launch a new state-backed fund to raise approximately $40 billion for domestic chip development, creating capacity that could lead to price wars and market saturation 2.

This supply chain restructuring carries significant implications for global markets, as the industry plans to invest about $1 trillion through 2030 in new fabrication plants globally, with annual revenue expected to exceed $1 trillion by the end of the decade 6.

Chinese companies are adapting by developing technologies that don’t rely on advanced US chips. For example, a robotics firm in Suzhou claims to have independently developed over 90% of its components 5.

The emergence of separate technological ecosystems is further reinforced by China’s strategic investments in critical minerals and digital infrastructure, positioning itself for leadership in the next industrial revolution despite international restrictions 5.

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