China's rapid expansion in mature-node wafer foundries is reshaping the global semiconductor landscape and intensifying competition for Taiwanese second-tier players. In a market estimated at roughly US$56.3 billion, Chinese foundries—such as Hua Hong Semiconductor and SMIC—are aggressively cutting prices and rapidly expanding capacity. This surge has not only prompted the US government to initiate a Section 301 investigation but has also served as a wake-up call across the industry.
Source: compiled by Joseph Chen/DIGITIMES, February
SMIC's revenue has reached record highs, yet its profitability has plunged, a consequence widely attributed to fierce price competition in the mature-node segment. On February 12, 2025, SMIC co-CEO Zhao Haijun vowed to confront these competitive pressures head-on to safeguard the company's market share. This declaration from China's largest foundry suggests that the battle over pricing between Chinese and Taiwanese foundries will only intensify throughout 2025.
Adding to the complexity, on February 5, 2025, the Semiconductor Industry Association (SIA) released its "Request for Public Comments: China's Acts, Policies, and Practices Related to Targeting of the Semiconductor Industry for Dominance." The document reveals several critical insights into the market dynamics.
China's growing dominance in semiconductor manufacturing
China maintains its position as the world's largest semiconductor market, capturing 29% of global chip sales in 2023. The country supplies approximately 20% of front-end and nearly 40% of back-end semiconductor manufacturing capacity, while also controlling crucial upstream materials such as gallium and germanium.
From 2015 to 2023, China's mature-node production capacity experienced a dramatic increase from 1.2 million to 3.0 million wafer starts per month, expanding its global capacity share from 19% to 33%. Through aggressive pricing strategies, Chinese mature-node wafers now cost approximately 10% less than those from other regions. Furthermore, domestic manufacturers are expected to contribute nearly half of all new global capacity additions over the next three to five years.
Source: compiled by Joseph Chen/DIGITIMES, February
US semiconductor industry maintains strategic importance
The US produced 12% of global mature-node chips in 2023, with a market size of approximately US$72 billion. While mature-node chips represent 40% of global semiconductor revenue, they account for 88% of sales volume and support US$10.8 trillion of economic activity in the US, equivalent to 26% of the nation's gross output. The industry maintains a high research and development expenditure ratio of around 20% of sales and supports over 2 million jobs directly or indirectly. Following the CHIPS Act, nearly 90 new semiconductor ecosystem projects have been announced, attracting close to US$450 billion in private investment across 28 states.
Market implications and future outlook
The global semiconductor supply chain remains deeply interconnected. Mature-node technologies, though established, continue to play a crucial role across diverse sectors—from automotive and industrial automation to national security and emerging technologies like artificial intelligence and next-generation communications. However, China's aggressive capacity expansion raises concerns about potential market oversupply and increased supply chain vulnerabilities, which could further intensify competition and geopolitical tensions.
These developments underscore China's dual role as both a production and consumption powerhouse while highlighting the US commitment to maintaining its leadership in innovation and manufacturing.
(Reporter Huang Qiong-Wen contributed to this article)
