[Edaily Reporter KIM JUNG YOU ] Forecasts indicate that the shortage of advanced semiconductors will be significantly alleviated over the next 10 years as Chinese foundry companies rapidly expand production. Changxin Memory (CXMT), which recently went public, is also projected to be able to meet 50% of China’s DRAM demand within two years.

On the 24th (local time), the Hong Kong-based South China Morning Post (SCMP) reported, citing a report by U.S. investment bank Goldman Sachs, that the supply of wafers manufactured using processes of 7 nanometers (nm) or smaller in China is estimated to grow at an average annual rate of 46% through 2035. This figure significantly exceeds the projected demand growth rate of 17% in China.

Accordingly, Goldman Sachs projected that the supply shortage relative to domestic demand for advanced semiconductors in China will narrow from 92% in 2025 to 34% by 2035. This projection is based on an estimated monthly demand of 619,000 wafers by 2035, while China’s supply of advanced-process wafers is predicted to rise to 410,000 wafers per month that same year.

This expansion in supply is expected to be driven by aggressive capacity expansion and yield improvements at SMIC, China’s largest foundry. According to Goldman Sachs’ forecasting model, SMIC is expected to add advanced-process wafer production capacity of 30,000 to 50,000 wafers per month annually from this year through 2031, and an additional 20,000 wafers per month annually through 2035. Yield rates are also estimated to rise from 23% this year to 50% in 2030 and 75% in 2035.

Taiwan’s TSMC, the world’s leading foundry that began mass production of 7-nanometer semiconductors in 2018, has achieved yields exceeding 90% depending on chip design and other factors. Subsequently, despite U.S. export controls, SMIC succeeded in producing 7-nanometer chips for Huawei in 2023. The Chinese government continues to support the expansion of not only advanced-process but also legacy (mature) process facilities.

In the case of CXMT, which recently secured substantial funding through an IPO, Goldman Sachs estimates that by 2028, the company will be able to meet 50% of China’s DRAM demand and 40% of its high-bandwidth memory (HBM) demand. SamsungElectronics(005930)· It appears to be closing in rapidly on companies likeSK hynix(000660). However, Goldman Sachs notes that CXMT still lags behind SamsungElectronics and SK hynix by about two to three generations in terms of technology.

According to Goldman Sachs, China’s semiconductor self-sufficiency rate (based on production volume) rose from 38% in January 2010 to approximately 70% as of June this year. This expansion of domestic facilities in China is expected to reignite a wave of local semiconductor investment. Goldman Sachs forecasts that China’s semiconductor capital expenditure will record double-digit annual growth through 2030.

The boom in semiconductor investment in China is also opening up a large market for domestic equipment manufacturers. Goldman Sachs forecasts that the Chinese wafer equipment market will reach $53 billion next year, with the market share of domestic equipment rising from 26% last year to 38% by 2028.

However, there are weaknesses. Lithography equipment is still considered a weak link in China’s domestic equipment ecosystem. China relies on the Dutch company ASML for most of its deep ultraviolet (DUV) lithography equipment. Exports of some models are restricted by U.S. regulations, and the introduction of extreme ultraviolet (EUV) lithography equipment—one of the most advanced types—is completely blocked.

Analysts note that even Shanghai Microelectronics (SMEE), a state-owned enterprise hailed as a beacon of hope for the development of domestically produced advanced lithography equipment, has yet to close the technological gap with global companies.