🧠 Food for thought

Implications, context, and why it matters.

China’s ambitious chip plan hides a costly reality

• Output targets keep rising, yet domestic production still wastes money and materials.
• Older tools for advanced chips drive up costs and cut yields, which squeezes margins, as in Chinese foundries’ 2024 results. SMIC’s net profit attributable to shareholders fell 23.3% in 2024 1.
• Speed also trails rivals.
• One AI firm found Huawei’s Ascend 910C chip delivers 60% of the performance of a comparable Nvidia H200, even with 80% of its theoretical processing power 2.
• Building “Non-A” (non-American) supply chains answers US controls and puts sovereignty ahead of near-term efficiency 3.

China’s chip strategy creates pressure on foundry competitors

• State-backed scale in China raises the heat on global foundries, with Samsung facing the sharpest squeeze.
• In leading-edge nodes, Samsung is losing customers to TSMC. Reports put TSMC’s 3-nanometer yields above 90% versus Samsung’s 50% 4.
• In the mid-range, SMIC’s subsidized 5-nanometer and 7-nanometer output weakens Samsung’s standing, especially with Chinese clients 4.
• The strain speeds up a split into two chip ecosystems, one tied to China and one in the global mainstream 3.
• Huawei helps steer the domestic track, using investment arms to fill gaps from design software to manufacturing equipment 3.