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Why has China been unsuccessful in making high tech chips in 30 years?

China has been successful in making high tech chips since 1965. However, China had been very limited by the overall comprehensive national strength because there has not been enough funds to develop the semiconductor industry.

China realized the huge potential of the semiconductor industry early on and invested resources to establish a primary semiconductor industry. For example, the semi-automatic lithography machine with a 5-micron process developed by China in 1978 was only 5 to 7 years behind the United States and Japan.

The first industrial transfer period was in the 1970-1980, from the United States to Japan. Japan used DRAM as its entry point, relying on the prosperity and development of the home appliance and industrial-grade computer industries, and had achieved a surpass with the technical support of the United States. This industry transfer had created some well-known Japanese manufacturers such as Sony, Toshiba, and Panasonic.

The second industrial transfer period was in the 1980-early 2000, from Japan to South Korea and Taiwan. South Korea and Taiwan relied on their low labor costs and a large number of high-quality talents to conform to the rapid development trend of consumer PCs and replaced most of Japan's market share in the semiconductor industry. South Korea had become the main producer of PC-side DRAM; Taiwan had become the leader in semiconductor foundry through the vertical division of labor in the fields of foundry and chip packaging and testing. This industry transfer has made Samsung, Hynix, TSMC, ASE and many other manufacturers famous.

From the 1980s to the 1990s, the 45 Institute of the Ministry of Electronics Industry, the Shanghai Institute of Optics and Mechanics, and the Institute of Optoelectronics of the Chinese Academy of Sciences continued to release multiple versions of lithography machines; in the new century, Shanghai Microelectronics undertook the 02 special task, and in 2007 developed the 90nm Process lithography machine. In 2019, the production of integrated circuits was 20.82 billion, an increase of tens of thousands of times in the past 40 years.

In 2000, the Chinese semiconductor company SMIC was established, which opened the pace of semiconductor foundry to the world stage. Since 2013, China's integrated circuit growth has deviated from GDP fluctuations, and achieved contrarian growth in 2015-2016 when the global integrated circuit market was sluggish, indicating that China's integrated circuit industry has been on the rise thanks to the global industrial transfer. In 2018, China's integrated circuit industry achieved revenue of 653.2 billion yuan, a year-on-year increase of 20.7%; in the past five years, the average growth rate of China's integrated circuit industry exceeded 20%.

The Chinese domestic lithography machine is mainly used in the secondary links with low technical requirements such as chip packaging. China is not without the ability to develop chip manufacturing. Related technologies have always been supported by national special funds. They are only used as technical reserves and have not entered the production link on a large scale. Since 2011, China has made the complete set of microprocessor chips for all its latest version of world class supercomputers.

China now is in the historical opportunity period of the third transfer of the global semiconductor industry. Unlike the more obvious periodicity of the mature global market, the growth of China's semiconductor industry is more prominent. China is the world's largest semiconductor/integrated circuit sales market, but process technology and production capacity are unable to meet the needs of the huge downstream market. The huge market cake and serious supply mismatch have provided sufficient impetus for the development of the semiconductor industry in Mainland China.

However, due to the lack of basic scientific research capabilities related to chip manufacturing and the process from micron to nanometer, China cannot keep up with the development of the world's top companies, lacking sufficient market competitiveness, and the gap is gradually widening.

The new technological revolution brought about by the breakthrough of China's 5G technology is to guide the downstream demand of the next round of semiconductor industry transfer to China. When the Chinese realize the independent chip design and manufacturing technology system that is truly applied on the market on a large scale and if many Chinese companies participate in a closed loop of fully independent design, manufacturing, application, and capital recovery, it is of great significance even if it is not the most advanced in the world. After the formation of an undisturbed whole industry chain, based on China's huge market, rapid iterative development will be unstoppable. China's technological strength is much stronger than before, and there is huge market power.

The strength of a country should actually be considered in all aspects, such as people's livelihood, technology, military, and culture. Rather than saying for sure that this country cannot make cars because it can’t make ballpoint pen refills, China is indeed weak in some branches, but the Chinese have to think about whether such weak branches pose a threat to the Chinese national security. Is the profit in this industry very high? As the Chinese development funds are limited, and the Chinese should concentrate their efforts on the industries they need to develop the most first.

By the end of 2018, the first-generation 32-layer 3D flash memory products of Yangtze Memory Technology Corp, abbreviated as YMTC, have achieved mass production. In 2016, the infrared thermal image core detector had been completely independently developed and put into production at Wuhan Guide Infrared Co., Ltd. The sensitivity and comprehensive parameters of the infrared smart detectors of Wuhan Guide Infrared Co., Ltd. are 30% to 50% higher than similar overseas products, the image is uniform, and the detection distance and recognition distance are longer. When there is no light source at night, the "super cat's eye" detector can clearly see tens of kilometers at night, and track the target of an air plane from 300 kilometers to 400 kilometers.

That is a partial story of how successful China has been in making high tech chips until today. Some secret products may not be included here.