China is over-reliant on imported goods for its semiconductor industry, and local chip companies supply only about 10 percent of its domestic needs as they remain in the development stage despite years of investments.
A Xinhua report Tuesday said China's yearly spending on semiconductor imports such as equipment and raw materials surpasses US$160 billion, which is more than its spending on petroleum goods. This is despite the country being the largest consumer of semiconductor products, it added.
The heavy dependence was due to the local semiconductor market starting out later than other countries, which led to companies' reliance on foreign technologies, the report said.
Zhou Xuecheng, department head of Wuhan Research Center for Integrated Circuit Design, added in the report that the lack of capital is slowing the development of China's chip industry. He pointed out that using the licensing fees for foreign-based software would cost about US$1 million, but did not indicate whether this was a one-off cost or an annual license.
Most of the local factories manufacturing semiconductors are contract manufacturers for foreign companies while domestic chipmakers could only supply less than 10 percent of the country's needs, it stated.
Domestic chipmakers in Beijing, Shanghai, Wuhan and Xi'an have made investment in the industry with the help of domestic banks and local governments. Despite the years of work invested, local chipmakers remain in the development stage, the report noted.
Xinhua said even Semiconductor Manufacturing International Corporation (SMIC), which is one of the bigger Chinese chipmakers, is far behind chip giants such as Intel, Samsung Electronics and Taiwan Semiconductor Manufacturing Company (TSMC).
Li Ping, vice president of Wuhan Xinxin Semiconductor Manufacturing Corporation, said China has developed its own "first class semiconductors" but the country was not able to mass manufacture these chips.
Local companies are now actively supporting the country's chip industry though. The city of Wuhan, for instance, invested US$1.3 billion in SMIC to boost its manufacturing efforts in 65 nanometer and 40 nanometer flash memory, it added.