As China rapidly expands advanced-process production capacity on the back of rising demand for artificial intelligence (AI) chips, the share of domestically supplied wafers at 7 nanometers (nm) and below is expected to rise sharply over the next 10 years. The domestic share, which was about 8% of demand in 2025, is projected to climb to about 66% by 2035.
On the 25th, according to China's Caixin and the Hong Kong-based South China Morning Post (SCMP), Goldman Sachs said in a recent report that China's shortage rate for advanced-process wafers at 7 nm and below is expected to fall from 92% in 2025 to 34% in 2035. It estimates that of China's monthly demand of 619,000 wafers in 2035, domestic supply will increase to 410,000.
The pace of supply growth is expected to far outstrip demand. Goldman Sachs estimated that China's supply of wafers at 7 nm and below will increase at an average annual rate of 46% from 2025 to 2035. Over the same period, the demand growth rate is projected at 17%. Demand for wafers for AI servers is expected to grow at an average annual rate of 42% over the same period.
The supply expansion is expected to be led by Semiconductor Manufacturing International Corp. (SMIC), China's largest foundry (contract chipmaker). Goldman Sachs assumed SMIC will add advanced-process capacity of 30,000 to 50,000 wafers per month each year from 2026 to 2031, and 20,000 wafers per month each year from 2032 to 2035.
SMIC's advanced-process Production yield is expected to rise from 23% this year to 50% in 2030 and 75% in 2035. Production yield is the share of chips that function properly among those produced from input wafers. With facility expansions and yield improvements occurring simultaneously, supply of Chinese-made advanced chips is expected to rise quickly.
However, a gap remains with TSMC, the world's No. 1 foundry. Depending on chip design and size, TSMC's 7 nm process Production yield can exceed 90%. SMIC, despite U.S. export controls on advanced chipmaking equipment, produced 7 nm-class chips used in Huawei smartphones in 2023.
Capital spending in China's semiconductor sector is also expected to expand. Goldman Sachs projected that the semiconductor industry's capital expenditure in China will reach $82 billion (about 113.6 trillion won) in 2030. That is 79% higher than its forecast a year ago. It said rising demand for Generative AI and expanded localization of semiconductors will drive the investment increase.
China's self-sufficiency rate based on semiconductor output is estimated to have risen from 38% in Jan. 2010 to about 70% in June this year. However, the self-sufficiency rate based on value is lower than that. This means that while China has rapidly increased output of general-purpose chips, it still heavily depends on overseas sources for advanced processes and high value-added products.
Chinese companies are also expected to gain share in semiconductor manufacturing equipment. Goldman Sachs projected that domestic equipment makers' share of sales in China's wafer fabrication equipment market will rise from 31% in 2026 to 38% in 2028.
Lithography equipment is cited as a key weakness in China's chip self-reliance. China relies heavily on the Netherlands-based ASML for deep ultraviolet (DUV) lithography machines that etch chip circuits onto wafers, and due to U.S. export controls it is difficult to obtain extreme ultraviolet (EUV) lithography systems needed for finer circuits. Goldman Sachs said equipment constraints will hinder efforts to narrow Production yield and technology gaps in advanced processes.
In memory, capacity expansions by ChangXin Memory Technologies (CXMT), China's largest DRAM maker, are seen as a swing factor. Goldman Sachs projected that by 2028 CXMT could supply about 50% of China's DRAM demand and 40% of its high bandwidth memory (HBM) demand.
CXMT's monthly wafer capacity is expected to rise from about 270,000 in 2026 to 447,000 in 2028 and 665,000 in 2030. Accordingly, Goldman Sachs predicted that CXMT could meet about half of China's DRAM demand in 2028.
CXMT is currently operating 12-inch DRAM fabs at two sites in Hefei and one in Beijing. Each plant's monthly capacity is estimated at about 100,000 wafers. Reuters reported that if new facilities in Shanghai, Hefei and Beijing all come online, CXMT's total capacity could more than double from current levels.
However, the technology gap with global leading DRAM makers such as Samsung Electronics and SK hynix is expected to persist for the time being. CXMT still lags the leaders in advanced DRAM and HBM, and access to advanced manufacturing equipment, including EUV, is restricted. Reuters also reported that in advanced DRAM technologies, including HBM, CXMT trails Samsung Electronics, SK hynix and Micron.
Goldman Sachs said the gap is unlikely to narrow significantly in the short term. Because a substantial portion of China's DRAM demand will inevitably rely on global suppliers for the time being, it projected that despite CXMT's expansion, Samsung Electronics and SK hynix will maintain business opportunities in the Chinese market.