AI boom accelerates China's chip industry growth as demand strains supply chain

By Eduardo Baptista

March 25 (Reuters) - China's spot manufacture is showing beardown maturation momentum arsenic a planetary sprint to physique AI infrastructure creates an detonation successful demand, sparking higher superior spending and ‌capacity enlargement arsenic chipmakers contention to support up, executives said connected Wednesday.

Growth successful the manufacture "is coming ‌faster than expected" this year, Jerry Zhang, China income caput astatine Swiss semiconductor components steadfast VAT, told Reuters connected the sidelines of Semicon ​China 2026 successful Shanghai, 1 of the industry's largest yearly gatherings.

As companies contention to ramp up production, China's manufacturing capableness for chips made connected mature 22nm to 40nm process nodes - utilized successful cars, smartphones and electronics - is projected to scope 42% of planetary output by 2028, up from 37% successful 2026, SEMI China President Lily Feng said.

CHIPS BECOMING ‌MORE COMPLEX

Artificial quality is besides reshaping ⁠the broader semiconductor sector, expanding requirements for testing, packaging, and high-speed interconnects, arsenic chips go much analyzable and performance-intensive.

"AI has importantly accrued computing powerfulness requirements, and that successful crook ⁠has raised the requirements for semiconductor testing," said Terry Feng, China income manager astatine U.S. spot investigating steadfast Teradyne.

The interaction is peculiarly disposable successful areas specified arsenic optical interconnects - a captious furniture linking chips wrong information centres - for which China ​is ​a large planetary supplier.

"Our bid backlog is already booked retired ​into adjacent year," said Zhou Limin of Mycronic's ‌MRSI unit, which makes high-precision instrumentality utilized to assemble optical modules, a cardinal constituent of optical interconnects.

The AI roar has besides started to strain the semiconductor proviso concatenation globally, peculiarly successful earthy materials and high-end components, arsenic manufacturers conflict to support up with rising demand.

Given the size and spot of its manufacturing industry, China is amended placed than astir to respond, according to executives and manufacture analysts.

"We are precise optimistic astir the representation (chip) rhythm - ‌there volition beryllium large-scale capableness expansion," said Bai Yu, vice president ​at Suzhou Origins Materials Technology, which volition statesman operation of a ​new accumulation basal adjacent month.

The institution supplies ​materials utilized successful manufacturing to apical Chinese chipmakers including ChangXin Memory Technologies, Yangtze Memory Technologies ‌and Semiconductor Manufacturing International Corporation.

FOREIGN SUPPLIERS STILL KEY ​PART OF CHIP SUPPLY CHAIN