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In 2023, China's semiconductor industry had a combined market value of **** trillion yuan. The largest segment of the industry is chip design, which contributed a total value of *** billion yuan. Despite China being considered the factory of the world, it only accounts for just over five percent of the global manufacturing capacity.

Segmented value chain

The semiconductor industry is divided into three, highly specialized niches. Fabless manufacturers design the computer chips and sell the hardware devices. In the next step, they outsource the actual production to foundries, which rely on cutting-edge technology such as lithography machines to keep up with the fast-pace of technological advancements. Finally, to ensure flawless functionality of the process a third set of companies take over the testing and packaging of the final product.

Building an industry

Within the context of global competition, the Chinese government regards semiconductors as a core technology and therefore strives for international independence. Therefore, Beijing has made the development of the domestic industry a national priority. However, achieving this goal means competing on multiple fronts. The United States is the leader in semiconductor design capabilities and Taiwan has the world’s highest production capabilities. In addition to that, China must still develop its manufacturing, testing, and packaging equipment in order to improve its international competitiveness. To achieve this mammoth task, the government has set up the national semiconductor fund with a funding value of *** billion yuan.