China’s Semiconductor Industry Research

Eurasia Development Group: Over the past two decades, China has built one of the world’s key semiconductor ecosystems, creating practical opportunities for Russia to localize mature and application-oriented segments of the industry.

The semiconductor industry has become one of the central pillars of technological sovereignty and industrial competitiveness. Chips underpin the development of computing, telecommunications, automotive electronics, energy, industrial automation, defense systems, and artificial intelligence infrastructure. Competition today is therefore not only about individual chips, but about control over the entire value chain.

Global Semiconductor Market Size and Growth, USD billion

ED Group’s research shows that China already combines three global roles: the world’s largest demand market, one of the largest manufacturing centers with 20% of global production capacity, and a rapidly developing ecosystem of domestic players.

China’s strongest positions today are concentrated in mature process nodes, power and discrete electronics, analog integrated circuits, wafer fabrication, packaging, and testing. At the same time, critical dependencies remain in advanced lithography, electronic design automation systems, foundational IP blocks, and certain categories of semiconductor manufacturing equipment.

Key Research Findings
China has become the world’s largest center of industrial semiconductor demand. In 2024, semiconductor shipments to electronics manufacturers in China reached USD 185.1 billion — around 24% of the global market and almost 46% of the Asia-Pacific market. China is also the principal hub for the downstream use of chips in electronics, telecommunications, automotive applications, and industry.

China’s manufacturing base is expanding rapidly. In 2025, integrated circuit output in China reached 484.1 billion units, compared with 201.8 billion units in 2019. The country has already developed a dense ecosystem of manufacturers, chip designers, equipment and materials suppliers, and packaging and testing companies.

Integrated Circuit Output in China, billion units

Localization is accelerating under the impact of sanctions and industrial policy. The localization rate of semiconductor manufacturing equipment in China increased from 10% in 2020 to 35% in 2025. Sanctions imposed by the United States and its allies did not halt industry development and, in many respects, accelerated import substitution, government financing, and the concentration of resources on critical segments.

Localization of Semiconductor Manufacturing Equipment in China

Financing has become one of the key drivers of growth. The National IC Fund, known as the Big Fund, was launched in three phases with a combined volume of around RMB 687 billion, or USD 95 billion. The industry also receives support from regional funds, tax incentives, access to the STAR Market, and government equity participation in national champions. Around 43% of the industry’s registered capital is directly or indirectly linked to the state.

China’s Integrated Circuit Market Size, RMB billion

AI chips have become one of the clearest examples of import substitution. Chinese brands’ share of the domestic AI chip market increased to 30% and, according to forecasts, could reach 50% by 2026. Restrictions on the supply of Nvidia solutions have increased demand for Chinese alternatives, including Huawei Ascend, Cambricon, Baidu Kunlun, and other application-specific solutions.

Advanced packaging and memory are becoming new centers of value creation. In modern AI accelerators, a significant share of costs is shifting from fabrication toward high-bandwidth memory, packaging, and system integration. For China, this creates a more realistic opportunity to strengthen its position, as advanced packaging and assembly involve lower technological barriers than advanced lithography.

What This Means for Russian Companies

For Russia, China’s experience is important not as a ready-made model to copy, but as a logic of action. China did not begin with the most technologically complex segments; instead, it consistently developed areas where domestic demand, an industrial base, and an achievable technological threshold already existed.

For Russia, the most realistic starting point is mature and application-oriented segments: power electronics, analog and discrete components, packaging, testing, and specialized integrated circuits for industry, transport, energy, and infrastructure.

Priority Matrix for Russia–China Cooperation in the Semiconductor Industry

The most practical areas of cooperation with Chinese companies include localization of assembly and testing, supplies of mature components, joint application-specific products, transfer of selected manufacturing and engineering solutions, and partnerships in power electronics, materials, packaging, and mature-node foundry manufacturing.

The least accessible areas are advanced process nodes, advanced lithography, foundational architectural IP blocks, and full-scale electronic design automation systems.

Russian companies can pursue four models of cooperation with Chinese partners:
1. Procurement and supply model — rapid access to mature components, materials, power electronics, and selected equipment.
2. Assembly localization — transfer of selected operations to Russia, including assembly, testing, module integration, and adaptation for the local market.
3. Technology partnership — use of China’s industrial base to accelerate the development of Russian solutions.
4. Joint industry-specific product — development of solutions tailored to specific Russian demand in energy, transport, telecommunications, industry, and infrastructure.

The optimal cooperation model is not simply the procurement of components, but the phased creation of a manufacturing and technological base: from addressing shortages and localizing assembly to jointly developing application-specific solutions. This approach can turn China’s component and manufacturing base into a source of technological development for Russian companies.

Eurasia Development Group supports such projects at every stage: from industry analysis and scouting of Chinese partners to organizing negotiations, conducting company due diligence, structuring cooperation models, localizing manufacturing operations, and launching joint technology projects in Russia.