An Advanced Manufacturing Puzzle – Why is China Still Playing Second Fiddle in Semiconductors?

China’s semiconductor industry poses an interesting advanced manufacturing puzzle: Why is it that, despite massive government efforts to build indigenous innovation and production capabilities, China still plays a very limited role in semiconductor production, IC design, and as an innovator? Foreign firms dominate China’s semiconductor consumption, constraining the demand for domestic innovation. Industry structure thus strengthens China’s systemic barriers to industrial upgrading-through-innovation.