The Chip Insider®– China’s IC Market Flooding
Author: G. Dan Hutcheson
Explore the impact of mature node chip overcapacity, price collapses, and global market implications. Learn how this shapes the semiconductor industry.
As you know, China's massive capacity build-up since 2018 gives it the ability to flood markets with mature and essential node chips… along three vectors: China's number of fabs, its production capacity, and its regional share of equipment sales. Currently, China's capacity can … give it a ceiling of almost 100% of mature and essential node chip demand. Global fab utilization for mature and essential node chips is well below 80%.
So far, the result has been a glut of ICs in China, resulting in price collapses, low to no profitability, and bankruptcies. Average IC prices in China were off more than 10% in 2024. In contrast, overall average IC prices excluding China were up over 50%... Does China have a dumping strategy?
The structural damage of dumping is unrepairable. This was learned in the 80s, when over-subsidized DRAM suppliers in Japan wiped out most production in the EU and US… Worse, the downward price spiral caught Japan up in the vortex, wiping it out in the 90s. More recently, the same phenomenon has occurred with China in … The problem is exacerbated by China's approach to industrial development, which has been seen across multiple segments, including EVs, solar, mobile, appliances, shipbuilding, and consumer electronics. Unlike the West, it starts with massive shotgun subsidies…
It's laissez-faire capitalism on steroids and has proven very effective for winning global markets. There is evidence to indicate this is happening with mature node ICs…. China’s winners often become fierce global competitors… Governments have learned to be more proactive, which is why Washington and the EU have launched probes into Chinese EV production and mature/essential chip production... Essential node segments are where Western foundries like Tower, SkyWater, and GlobalFoundries focus. TSMC's point of differentiation in its mature technologies is based on service and trust. Nevertheless, all have experienced price pressure in nodes at 28nm and above. However, attempts to block or tariff China’s foundries are likely to fail…
China's end around is … This could lead to a full decoupling if it’s not managed correctly… While I believe the probability is below 10%, there may even be a kinetic attempt to deny the West access to Taiwan's advanced production capacity…
“History never repeats itself but it often rhymes." —as Mark Twain is reputed to have said
