China is expected to sharply increase its supply of advanced chips over the next decade, reducing its dependence on overseas suppliers, according to Goldman Sachs.
The supply of wafers made with 7-nanometre and smaller processes is forecast to grow at an annual rate of 46 percent between 2025 and 2035. However, limited access to advanced lithography equipment is expected to remain a major obstacle to complete semiconductor self-sufficiency.
Supply Gap Set Narrow
Goldman Sachs estimates that China’s advanced-node wafer supply will reach about 410,000 wafers a month by 2035. Domestic demand is expected to reach around 619,000 wafers a month during the same period, leaving a supply gap of 34 percent. The gap is much larger today, with domestic supply meeting only about 8 per cent of demand in 2025.
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The sharp rise in supply is expected to come mainly from larger production capacity and better manufacturing yields. Semiconductor Manufacturing International Corp (SMIC) is expected to play a central role because it is China’s largest contract chipmaker. Goldman expects the company to make substantial additions to its advanced-node production capacity over the coming years.
SMIC is expected to add between 30,000 and 50,000 advanced-node wafers of monthly capacity each year from 2026 to 2031. It is then expected to add another 20,000 wafers per month each year through 2035. The forecast also assumes that SMIC’s production yield will improve from 23 percent in 2026 to 50 percent in 2030 and 75 percent by 2035.
Yields Remain Important
A production yield refers to the share of manufactured chips that meet required quality standards. Higher yields allow a factory to produce more usable chips from the same amount of manufacturing capacity. This makes yield improvement as important as adding new production lines.
Goldman’s projections show a major improvement in China’s advanced-chip production efficiency over the next decade. By comparison, Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker, began mass production of 7nm chips in 2018. TSMC’s yields can exceed 90 percent, although the exact rate varies depending on chip design and die size.
China’s push to expand advanced chip production gained momentum after the US tightened restrictions on Huawei Technologies in 2020. Those measures cut Huawei’s access to chips made by TSMC, increasing pressure on China to develop more domestic manufacturing capacity. Despite later US-led restrictions on advanced semiconductor equipment, SMIC produced a 7nm chip for Huawei in 2023.
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Investment Push Continues
Beijing has continued to support the expansion of both advanced and mature semiconductor production. This policy has helped increase the share of chips manufactured inside China. Goldman estimates that China’s chip self-sufficiency rate reached about 70 percent by production volume in June, compared with 38 percent in January 2010.
The picture changes when semiconductor output is measured by value rather than volume. Advanced chips are generally more valuable than many mature-node chips, meaning production volume alone does not show the full level of technological independence. China, therefore, still faces a wider gap in higher-value semiconductor production.
The expected expansion is also likely to drive more investment across China’s semiconductor industry. Goldman forecasts that China’s semiconductor capital spending will continue to grow at double-digit rates each year through the end of the decade. The bank expects annual chip-related capital expenditure to reach about $82 billion by 2030, which is 79 percent higher than its forecast from a year earlier.
Goldman analysts said rising demand from artificial intelligence is one factor supporting semiconductor investment. They also pointed to the continued development of China’s domestic chip ecosystem and growing demand for advanced chips, packaging technologies, and memory products. These trends are expected to keep investment in the sector strong through the rest of the decade.
Equipment Gap Still Matters
The expansion is creating a growing market for Chinese semiconductor equipment companies. Goldman expects China’s wafer fabrication equipment market to reach about $53 billion in 2027. Local companies are projected to account for 38 percent of that market by value in 2028, compared with 26 percent in 2025.
Chinese equipment makers have already developed stronger positions in areas such as etching and deposition. They are now expanding into more difficult fields, including ion implantation, inspection, and measurement systems. These technologies are important because chip production requires precise control at several stages of manufacturing.
Lithography remains the biggest weakness in China’s domestic semiconductor equipment chain. Lithography machines use light to create extremely small circuit patterns on silicon wafers, making them essential for producing advanced chips.
China continues to rely heavily on Dutch company ASML for advanced deep ultraviolet (DUV)and lithography machines, while access to ASML’s most advanced extreme ultraviolet (EUV) systems remains blocked.
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Shanghai Micro Electronics Equipment Group, a state-owned Chinese company, is working to develop domestic lithography technology. Its systems, however, remain behind those produced by leading international manufacturers. This equipment gap means China can expand chip production rapidly while still facing limits in the most advanced parts of the manufacturing process.
China’s semiconductor industry is, therefore, entering a period of major capacity growth, but higher production alone will not close every technology gap. If domestic companies continue improving yields and equipment, the country is likely to reduce its dependence on imported advanced chips substantially by 2035. Lithography development and access to key manufacturing technologies will remain central to how far that effort progresses.
