What do China’s semiconductor insiders think of the nation’s self-reliance drive?

Joseph Xie Zhifeng relocated back to his native Shanghai in 2000 after 17 years away in the US and Singapore to join the founding team of what would become China’s biggest semiconductor manufacturer.

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“Pudong was still mostly farmland and the entire Zhangjiang hi-tech park was a village back in 2000,” Xie said in an interview, referring to the Shanghai district where Semiconductor Manufacturing International Corp (SMIC) has its headquarters. “Today, the Yangtze River Delta supply chain is basically complete and only lags the leading global standard by five to 10 years.”

Phenomenal transformation notwithstanding, industry veterans worry that it is a technology gap that may never be closed if China continues down the same path of importing foreign technology instead of developing its own, dooming it to dependence on friends who may become tomorrow’s foes.

This mindset started with assembly lines for color televisions, then to cars and integrated circuits. But the technology that is sold to China is often outdated and, in some cases, obsolete, according to Xie, who had stints at Intel and Chartered Semiconductor before joining SMIC, where he was vice president before he left in 2011.

The fact that China may have had little choice of importing hi-tech know-how given how far it had fallen behind in technology and manufacturing expertise adds to the hand-wringing.

“There’s a Chinese saying that even a clever housewife cannot cook a meal without rice. But in this case, we didn’t just lack the rice, we didn’t even have stoves, pans, and other cookware,” Xie said. “For a long time, such notions didn’t occur to the country’s top policymakers.”

The year-long trade war has shown that the Trump administration is willing to block Chinese access to everything – from software and semiconductors to nuclear technology – to slow China’s rise.

Signs that the world’s two biggest economies are decoupling are sending shock waves through the global supply chain and have exposed China’s dependence on American technology for key pillars of its economy.

Photo credit: Open Grid Scheduler / Grid Engine

Nowhere is this threat more evident than in semiconductors, after the US put one of China’s top companies, Huawei Technologies, on a trade blacklist that prevents American companies like Intel and Qualcomm from selling it chips.

These complex, tiny devices are critical to the function of everyday consumer electronics, communications, and computing products, as well as increasingly sophisticated equipment in a range of sectors, from aerospace and financial services to health care and retail. The industry is capital-intensive, however, and currently based around a complex global supply chain.

China’s top leadership has redoubled efforts to channel more funds and state support into the sector in the hopes of narrowing the gap.