China Targets 5x Boost in Advanced Chip Production Amid Export Controls

China's semiconductor industry is embarking on an ambitious plan to dramatically expand its production of advanced logic chips, targeting a fivefold increase in 7nm and 5nm wafer output to 100,000 wafers per month within the next two years, according to a report from Nikkei. The longer-term goal aims for an additional 500,000 wafer starts per month by 2030, representing a massive scaling of domestic advanced manufacturing capacity.

This expansion comes as Chinese chipmakers face significant challenges due to export controls on advanced semiconductor manufacturing equipment from the United States, Japan, and European nations. The country's current advanced chip production capacity remains limited, with Semiconductor Manufacturing International Corp. (SMIC) standing as the only Chinese company capable of manufacturing chips on 7nm-class processes.

Current Production Constraints

SMIC has been gradually expanding its leading-edge manufacturing footprint across multiple facilities in Shanghai, Shenzhen, and Beijing. Industry analysis from SemiAnalysis suggests the company was on track to approach approximately 50,000 wafer starts per month on advanced production nodes in 2025. However, this expansion faces significant headwinds.

SMIC's co-CEO Zhao Haijun recently highlighted operational challenges during a conference call with financial analysts, noting that the company has procured some advanced manufacturing equipment but cannot deploy it due to missing supporting tools. "Due to the impact of external factors, the company has procured some key equipment in advance, while the supporting equipment may not be purchased yet," Zhao explained. "This timing difference has brought an even situation that the procured equipment may not be able to form production lines this year."

Despite these constraints, SMIC expects to continue adding capacity, though primarily to mature node production lines rather than advanced ones. The company projects an increase of approximately 40,000 12-inch equivalent wafers per month by the end of this year compared to the end of 2023.

Industry-Wide Expansion Efforts

Beyond SMIC, China's second-largest contract chipmaker, Hua Hong Semiconductor, is shifting strategy to enter advanced logic manufacturing. Historically focused on mature nodes, Hua Hong is now ramping 28nm and 22nm-capable capacities under pressure from central and regional authorities. Huawei has reportedly provided technical assistance to support this transition.

Additional players are emerging in the advanced chip manufacturing space. Huawei-linked entities such as PengXinWei and DongGuang GuangMao Technologies are building pilot lines and development capacity, with efforts targeting nodes more advanced than 10nm. This diversification represents a broader industry push to reduce dependence on foreign technology.

Mature Node Capacity Analysis

While advanced node production faces significant constraints, China's mature node manufacturing capacity remains more robust. UBS estimates current capabilities at 30,000 to 50,000 wafer starts per month for 22nm/28nm nodes and below. This suggests that SMIC's 7nm-capable production lines produce considerably fewer wafers monthly than mature node facilities.

Looking ahead, UBS projects more optimistic growth for mature node capacity. Industry discussions indicate potential expansion of 50,000 to 60,000 wafer starts per month or higher in 2026, up from 30,000 to 50,000 in 2025. The firm's prior analysis suggested China targets reaching 150,000 to 160,000 wafer starts per month of advanced node capacity by the end of 2027.

Strategic Implications

The push for advanced chip manufacturing expansion reflects China's strategic imperative to develop domestic semiconductor capabilities, particularly for artificial intelligence applications. The five-year timeline to reach 100,000 wafer starts per month represents an aggressive ramp that would require overcoming significant technical and supply chain challenges.

The export controls have forced Chinese companies to adapt their strategies, focusing on maximizing the utility of available equipment while developing indigenous alternatives. This includes reverse-engineering efforts and increased investment in domestic tool development, though these initiatives require substantial time to mature.

Technical and Economic Considerations

The feasibility of achieving these production targets depends on several factors. First, the availability of critical equipment components remains uncertain due to ongoing export restrictions. Second, the technical expertise required to operate advanced manufacturing processes at scale takes years to develop.

Economic considerations also play a crucial role. Advanced semiconductor manufacturing requires massive capital investment, with each new fabrication facility costing billions of dollars. The return on investment timeline becomes more challenging when companies cannot access the latest equipment or must rely on older-generation tools.

Global Supply Chain Impact

China's push to expand advanced chip production could have significant implications for the global semiconductor supply chain. If successful, it would reduce China's dependence on foreign foundries for critical applications, potentially altering global technology dynamics.

However, the ambitious nature of these targets, combined with the technical and supply chain challenges involved, suggests that achieving them will require sustained effort over multiple years. The semiconductor industry typically experiences production ramp challenges even under optimal conditions, making the two-year timeline for a fivefold increase particularly demanding.

Future Outlook

The success of China's advanced chip manufacturing expansion will likely determine the country's ability to compete in high-performance computing, artificial intelligence, and other technology-intensive sectors over the coming decade. While the targets represent an aggressive growth trajectory, the combination of government support, industry investment, and strategic necessity provides strong motivation for achieving these goals.

The next two years will be critical in determining whether China can overcome the technical and supply chain barriers to substantially increase its advanced chip production capacity. The outcome will have significant implications for both the domestic Chinese technology ecosystem and the broader global semiconductor industry structure.