Article by Maia Trubiano
In late October 2025, China’s Communist Party called for a nationwide mobilisation to achieve “decisive breakthroughs” in semiconductors and other strategic technologies. The message, issued through a central committee document outlining priorities for the upcoming 2026–2030 Five-Year Plan, signalled a new phase in Beijing’s push for technological self-sufficiency. For China, the ability to design and manufacture advanced chips has evolved from an economic goal into a pillar of national security and global influence.
The 21st century Cold War
China’s pursuit of self-sufficiency is unfolding amid a wider global reconfiguration of semiconductor supply chains. In the United States, Silicon Valley entrepreneurs and policymakers are mounting their own response to dependence on East Asian production hubs. One of the most striking examples is Substrate, a secretive San Francisco start-up founded in 2022 and backed by investors including Peter Thiel’s Founders Fund. Substrate aims to challenge Taiwan Semiconductor Manufacturing Company (TSMC) and Dutch lithography giant ASML by developing a radically different chipmaking technology using particle accelerators. The company’s explicitly ideological mission is to make the U.S. “competitive against China” , reflecting how national security and industrial innovation have merged into a single narrative across both sides of the Pacific. The emergence of such ventures underscores a crucial point: the race for self-sustainability in chipmaking is not unique to China. In effect, Washington and Beijing are building parallel, partially decoupled ecosystems that redefine what technological sovereignty means in the 21st century.
China Technological breakthroughs
China is making tangible progress in replacing foreign technology within its semiconductor supply chain. In September 2025, the Financial Times revealed that according to two people with knowledge of the development the Semiconductor Manufacturing International Corporation (SMIC), the country’s leading chip producer, had begun testing a domestically built deep-ultraviolet (DUV) lithography machine developed by Yuliangsheng, a Shanghai-based start-up. The success of the experiment would represent a major milestone in reducing China’s dependence on foreign technology. Until now, the country’s chipmakers have relied almost entirely on advanced lithography machines made by ASML, a Dutch company whose tools are essential for printing the microscopic circuits that make up modern processors.
The new Chinese-built machine could already produce mainstream chips used in cars and consumer electronics (at the 28-nanometre level) and, with some complex processingtechniques, might even reach 7-nanometre chips, which in “civilian” terms would mean being able to operate in artificial intelligence and smartphones. In industry parlance, indeed, “nanometres” refer to each new generation of chip, rather than a semiconductor’s physical dimensions.
This news would be revolutionary, if it was not for a slight limitation which China can’t ignore: even though most of the parts are made domestically, some key components still have to be imported, and bringing such machines into mass production could take years of fine-tuning.
The plan of Beijing for compensating these gaps is through rapid industrial expansion. According to Financial Times reports, China’s chipmakers are preparing to triple national output of AI processors in 2026, with new fabrication plants linked to Huawei expected to come online within a year. SMIC plans to double its 7-nanometre capacity, providing chips not only for Huawei but also for Chinese designers such as Cambricon, MetaX, and Biren.
These efforts are part of a coordinated attempt to build a vertically integrated ecosystem in which chip design, manufacturing, and AI applications evolve together.
This alignment is exemplified by DeepSeek, China’s leading AI start-up, which has developed a new FP8 data format tailored to domestic chips. Although these processors still lag behind Nvidia’s most advanced products, DeepSeek’s approach aims to optimise efficiency and performance within China’s emerging ecosystem. As one Chinese executive told the Financial Times: “If we succeed in developing and optimising these Chinese chips to train and run Chinese models, one day we will look back at this as a defining DeepSeek moment.”
U.S. export restrictions prevent ASML from selling to Chinese companies the most advanced chipmaking tools in the world, the EUV machines. This prohibition significantly impacts China’s progress. We are talking about chips made using extreme ultraviolet (EUV) lithography, a process that uses an even shorter wavelength of light to etch incredibly small features (down to 2 nanometers, the current cutting edge).
China is trying to close this technological gap through projects like SiCarrier’s “Mount Everest” , a homegrown EUV initiative that reflects enormous ambition but remains in the early research phase. At the Shanghai Semicon Conference, SiCarrier unveiled a fleet of advanced chipmaking tools, with product lines named after China’s most famous mountains, such as Wuyi and Emei, signalling its intent to challenge global leaders like ASML. Yet, as Bernstein analyst Lin Qingyuan cautioned: “It is one thing to have a prototype of a lithography machine; it is another to put it into volume production and make it compete with ASML”
China though, hides some other ways to face the U.S. challenge. According to a Financial Times investigation (September 2025), more than $1 billion worth of Nvidia’s advanced B200 AI processors entered China in just three months after Washington tightened exportcontrols. The chips, banned for sale to China, are being resold through a vast grey network of intermediaries and distributors such as the Anhui-based company “Gate of the Era”, which reportedly handled over $400 million in hardware.
These processors, essential for training next-generation AI models, arrive in China assembled into ready-to-use data-centre racks and are traded openly on social media platforms like Douyin and Xiaohongshu, despite formal restrictions.
Industry sources told the Financial Times that the ban has created inefficiency and high profits for risk-taking middlemen rather than halting supply altogether, with new routes emerging through Southeast Asia and even parts of Europe.
The existence of this thriving black market underscores a paradox: while Beijing pushes for self-reliance, Chinese AI companies still rely on American technology to power their systems.
State-Led Strategy and Centralised Innovation
A fundamental aspect to take into consideration is that China’s semiconductor drive is powered by a state-led model of innovation. Over the past decade, Beijing has funneled billions of dollars into national semiconductor funds and regional tech clusters, encouraging collaboration between universities, research institutes, and private firms. The upcoming Five-Year Plan strengthens this “whole-nation” approach, aligning investment, industrial policy, and scientific research under direct Party oversight.
Local governments have joined the race, establishing semiconductor hubs in Shanghai, Shenzhen, and Wuhan, each focusing on specific parts of the chip supply chain: from materials and equipment to design and packaging. This degree of coordination allows China to mobilise resources quickly and direct them where needed, even if it sometimes leads to duplication and inefficiency. Still, the underlying belief is clear: technological self- sufficiency cannot be left to market forces, it must be orchestrated as a national mission.
Sources:
– Financial Times: “Nvidia AI chips worth $1bn smuggled to China after Trump export controls” ( https://www.ft.com/content/6f806f6e-61c1-4b8d-9694-90d7328a7b54)
– Financial Times: “China trials its first advanced tools for AI chipmaking” ( https://www.ft.com/content/8fd79522-e34f-4633-bc87-ef0aae2d9159 )
– Financial Times: “China seeks to triple output of AI chips in race with the US “(https://www.ft.com/content/64caeab8-a326-4626-98fb-e1bf665827d3 )- Financial Times: “China calls for ‘extraordinary measures’ to achieve chip breakthroughs” (https://www.ft.com/content/a0d51b13-de0a-43f7-b0d7-6cf44643269d )
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