US sanctions strengthen China’s chip industry

Instead of harming China’s ambitions in the semiconductor sector, US sanctions may be inadvertently accelerating its advancementsays a report – according to the publication, Washington measures may be strengthening the Chinese chip market

A new report states that the sanctions and restrictions imposed by the United States on the semiconductor market to contain China’s growth may actually be boosting an increase in the semiconductor industry of the Asian country, building a more solid and, unintentional ecosystem, accelerating Chinese ambitions in the industry.

According to information released by the DigitimesAlthough the US and China agreed in a 90 -day trade agreement to suspend the toughest rates between the two nations, “tensions in the semiconductor sector are increasing.”

O Digitimes It states that the increase in tensions has again placed under scrutiny the Taiwanese manufacturers of integrated circuit substrates (IC Substrates) operating in China, revealing doubts about the effectiveness of US sanctions.

As highlighted in the report, the substrate supply chain in Taiwan presented surprisingly strong results in the first quarter of 2025. According to the Digitimesa “clear disparity” in the position of companies in Taiwan compared to those of China reveals the possibility that “the Chinese semiconductor ecosystem is accelerating its rise, even under the restrictions imposed by the US.”

As the report points out, President Trump abandoned staggered rules for diffusion of Biden government chips in favor of a broad ban on the global use of Huawei’s artificial intelligence chips, ascend, as well as measures to prevent the export of other AI chips to China – a decision that Nvidia CEO Jensen Huang has classified as “a failure.”

The report highlights the contrasting performances of Unimicron and Zhen Ding Technology. The first recorded low use of high technology capacity in its factories in China as a result of the most rigid restrictions on chips. The world’s leading IC substrate manufacturer has seen a recovery on requests at their facilities in Taiwan, compensating for the fall, but executives are still concerned that increasing sanctions can lead to permanent loss of high -value business from China’s premium electronics sector.

On the other hand, Zhen Ding – cited as a central example of the theory that sanctions are boosting the Chinese chips industry – is recording strong dynamism in domestic markets in China. The company attributes its strategy of “China to China” (prioritizing local production to meet domestic demand) as a key factor for a 30% annual increase in revenue in its substrate division.

According to the DigitimesThe continuous increase in demand in China can allow Zhen Ding to take advantage of its manufacturing unit in Kaohsiung, in artificial intelligence parks, to meet market needs, reversing the traditional flow of the supply chain.

For sector observers cited in the report, the result is what they call “critical paradox”. THE Digitimes It states that “instead of damaging China’s ambitions in the semiconductor sector, US sanctions may be inadvertently accelerating them,” with domestic demand and the location of the supply chain creating a resistant ecosystem that “can become even stronger in the face of adversity.”

This view broadly reflects NVIDIA CEO’s recent comments Jensen Huang about the ban on AI chip exports. As mentioned, he considered measures a failure and specifically highlighted that companies are resorting to Chinese competitors from Nvidia to supply the lack of US developed chips, such as H20, benefiting their rivals rather than harming the industry as a whole.

Recently, a report has stated that Nvidia plans to launch new Blackwell architecture -based solutions to the Chinese market later this year, replacing the H20.ai model, blocked by the restrictions.

With information from Torshardware.com*