Chinese ministry calls for supply chain resiliency, without mentioning chip production targets

Chinese ministry calls for supply chain resiliency, without mentioning chip production targets

Michaela Rehle | Reuters

BEIJING — In the face of a global chip shortage and U.S. sanctions, China’s Ministry of Industry and Information Technology declined Monday to name targets for semiconductor production.

China would like to build up self-sufficiency in competitive technologies and rely less on imports of semiconductors, or chips, which are used in products ranging from laptops to automobiles. The country had previously announced that by 2020, it would like to produce 40% of the chips it uses, and raise that ratio to 70% by 2025.

But when asked at a press conference Monday about chip production goals, the ministry’s spokesperson Tian Yulong did not share specific figures. Instead, he laid out how the government was supporting the industry with measures such as tax cuts and talent development.

“The semiconductor industry’s development faces opportunities and challenges that require the world to strengthen cooperation and build the semiconductor industrial chain together, to allow it to develop in a healthier and more sustainable way,” Tian said, according to a CNBC translation of his Mandarin-language remarks.

His comments come as a global shortage in chips is forcing major automobile manufacturers to cut back on production. The backlog in semiconductor manufacturing grew out of high demand for electronics amid the coronavirus pandemic, and a highly specialized global supply chain that has faced additional pressure from the U.S.-China trade tensions that began under former President Donald Trump.

Last year, the Trump administration put restrictions on China’s biggest chip manufacturer, SMIC, that prevent it from buying high-end equipment needed for production.

It’s not yet clear what specific action U.S. President Joe Biden will take. Last week, he signed an executive order to review supply chains in an effort to address the shortage.

Meanwhile, China’s industry and technology ministry is trying to improve supply chain coordination in the country’s automobile industry, where 90% of chips used are imported, according to a state media report Friday.

During Monday’s press conference, ministry head Xiao Yaqing said ensuring supply chain resiliency is a priority.

“We must put improving the stability and competitiveness of industrial chains and supply chains in a position of prominence … and firmly seize the initiative in the fiercely competitive international market,” Xiao said.

Nationwide, data indicate China did not meet its goal of 40% domestic sourcing in 2020 amid the coronavirus pandemic.

Only 15.9% of the $143.4 billion worth of integrated circuits — another name for semiconductors — sold in China last year were produced in the country, according to U.S.-based market research firm IC Insights.

China’s leaders are set to kick off an annual parliamentary meeting this week to determine national development goals for the next five years and beyond.

— CNBC’s Arjun Kharpal contributed to this report.