Sunny Cheung
Beijing is on course to dominate innovation in and production of legacy semiconductor chips, which strategists see as a way to push back against U.S.-led containment in critical technologies. These chips, used everywhere from vehicles to defense, offer a scalable and resilient path for latecomers to build industrial leverage without needing frontier innovation.
The Chinese domestic industry relies on vast state subsidies and fosters internal competition that leads to brutal price wars between firms. This ultimately allows manufacturers to undercut overseas competitors and drive them out of business, thereby capturing the global market share and reshaping supply chain dependencies.
This strategy prioritizes market dominance over profitability, part of a broader shift from growth-centric to security-driven industrial planning.
Chinese experts hold up Japan’s past missteps as a key lesson, and advocate remaining aligned with market demand to avoid stagnating.
In February 2025, Peking University scholar He Pengyu (何鹏宇) published an article titled “Why China Must Establish a Competitive Advantage in Traditional Chips” (中国为什么要在传统芯片上形成竞争优势) (Tencent News/Wenhua Zongheng, February 24). He argues that legacy chips should be viewed as strategic assets: technologically adaptable, economically essential, and geopolitically consequential. While not a prominent figure in the semiconductor policy community, He is among the first to make a comprehensive and analytically rigorous attempt to explain the People’s Republic of China’s (PRC) sustained and largely understated focus on foundational chip technologies. His essay fills a critical gap in a policy landscape where official strategies are rarely transparent, effectively articulating the underlying logic of Beijing’s long-term industrial maneuvering for leadership in mature-node technologies.
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