China’s advanced chip supply to surge by 2035 despite equipment bottlenecks, Goldman says

The increase will be driven by aggressive capacity expansion at SMIC, China’s largest contract chipmaker, as well as improving yields

China is on track to dramatically slash its deficit in advanced chips over the next decade as domestic foundries rapidly scale up production, though the weak link of lithography threatens to keep full semiconductor independence out of reach, according to US investment bank Goldman Sachs.

The supply of wafers made using 7-nanometre and below advanced processes is projected to grow at a compound annual rate of 46 per cent between 2025 and 2035, far outpacing the 17 per cent growth expected in domestic demand, Goldman analysts said in a report on Monday.

That would narrow the gap between domestic supply and demand to 34 per cent by 2035, from 92 per cent in 2025, according to the investment bank. China’s advanced-node wafer supply is expected to reach 410,000 wafers per month by then, compared with demand of 619,000 wafers.

Goldman’s model assumes SMIC adds monthly capacity of between 30,000 and 50,000 advanced-node wafers each year from 2026 to 2031, before adding another 20,000 wafers per month annually through 2035. It also assumes yields rise from 23 per cent in 2026 to 50 per cent in 2030 and 75 per cent by 2035.

The world’s No 1 foundry, Taiwan Semiconductor Manufacturing Company (TSMC), which started mass-producing 7nm chips in 2018, achieves yields that can exceed 90 per cent, depending on chip design and die size.