Rising Concerns Over China’s Progress in Chip Manufacturing

By mid-2026, China’s semiconductor industry underwent a profound transformation, evolving from a posture of defense against U.S. export controls to a phase of aggressive, state-backed industrial mobilization.

Rather than being deterred, China has utilized these external pressures as a catalyst to accelerate self-sufficiency.

A major milestone has been the domestic mass production of immersion Deep Ultraviolet (DUV) lithography machines, significantly reducing reliance on foreign equipment.

Driven by intense domestic demand, profits for China's chipmakers soared by over 2,500% in the first half of 2026.

While China may not yet reach the cutting-edge performance of global leaders like TSMC, it is building a 'good enough' domestic stack to support its economic and national security needs.

This emergence of a bifurcated, parallel semiconductor supply chain is currently reshaping global markets, forcing investors and policymakers to navigate a new era of competitive, high-stakes industrial strategy.