China’s chip output rose in 2023 because export controls were targeted and phased in unevenly—not because the restrictions had no effect. Chinese companies had already accumulated foreign equipment, production knowledge and supplies. Beijing then added heavy state funding, domestic-substitution programs and closer coordination between Huawei, SMIC, equipment makers and research institutions.
The result was a real increase in chip volume and manufacturing capacity, plus a striking 7-nanometer-class smartphone processor. But it was not semiconductor self-sufficiency or parity with TSMC, Samsung or Nvidia. China expanded production while remaining dependent on foreign tools, materials, software and expertise, and while the broader electronics sector became less profitable.
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What “boomed” actually means
China’s Ministry of Industry and Information Technology reported that the country produced 351.4 billion integrated circuits in 2023, an increase of 6.9% from 2022. That is the headline figure behind claims that Chinese chip production “boomed.”
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1Clear out junk files and repair common Windows errors2Fix the driver behind crashes, sound loss and screen glitches3Repair Windows errors before they cause bigger problemsHowever, the number measures total chip units, not the number of advanced processors or the economic health of the industry. It includes chips used in cars, appliances, displays, industrial equipment, power-management systems, sensors and consumer electronics, as well as smartphone and computing processors.
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The broader figures were considerably less dramatic. Electronic-information manufacturing value added rose 3.4% in 2023, while sector revenue fell 1.5% and profits fell 8.6%. Fixed-asset investment nevertheless increased 9.3%. The data therefore describe an industry that was adding capacity and output despite weak commercial conditions—not a simple profit boom. China’s MIIT statistics are the appropriate source for distinguishing these measures.
| Measure | 2023 result | What it tells us |
|---|---|---|
| Integrated-circuit output | 351.4 billion units, up 6.9% | More chips were produced overall |
| Electronic-information manufacturing value added | Up 3.4% | The wider sector grew more slowly |
| Sector revenue | Down 1.5% | Higher unit output did not guarantee stronger sales |
| Sector profits | Down 8.6% | The expansion was not an uncomplicated commercial success |
| Fixed-asset investment | Up 9.3% | Capacity-building continued despite weak margins |
The Mate 60 Pro made the issue impossible to ignore
Huawei’s Mate 60 Pro, released in late August 2023 and sold in September, drew global attention because it used a Huawei-designed Kirin 9000S processor manufactured by SMIC. The chip was widely assessed as using a process approximately equivalent to 7 nanometers.
That was a major technical achievement. Huawei had been cut off from many advanced foreign technologies, and the phone appeared to demonstrate that Chinese companies could produce an advanced 5G smartphone processor despite those restrictions. The assessment is summarized in the U.S.-China Economic and Security Review Commission’s 2023 annual report.
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Export controls targeted chokepoints, not every semiconductor transaction
The U.S. rules announced on October 7, 2022, were designed to restrict China’s access to advanced logic chips, certain artificial-intelligence processors and the equipment and software needed to manufacture them. They also limited some transactions involving listed Chinese companies and advanced-node production.
They were not an instant ban on every semiconductor-related export to China. The measures were generally defined by factors such as:
- the performance or architecture of a chip;
- the specifications of manufacturing equipment;
- the intended end use;
- the identity of the end user; and
- the node or production capability involved.
Foreign controls also arrived at different times. Japan added relevant semiconductor equipment to its export-control list in July 2023, while Dutch restrictions began in September 2023. This created a period during which Chinese companies could still purchase or receive some equipment before the allied rules took effect. The chronology is detailed in the USCC report.
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China bought equipment before the restrictions tightened
The most immediate explanation for rising 2023 output is that controls did not erase equipment already inside China. Fabs use expensive tools for years, and production can continue with machines purchased before a new rule takes effect.
Chinese companies also accelerated purchases during the implementation gap. According to the USCC, China imported approximately $13.8 billion of semiconductor manufacturing equipment from all countries during the first eight months of 2023. Imports from the Netherlands reached about $3.2 billion, up 96.1% from the same period a year earlier.
Those purchases mattered for several reasons:
- equipment has a long service life;
- firms could use existing inventories and spare parts;
- maintenance arrangements could preserve installed capability;
- future-sale restrictions did not remove legally acquired tools; and
- older equipment remains highly useful for mature-node production.
This stockpiling helped Chinese fabs keep expanding even as access to newer tools became more difficult. It also meant that the effect of export controls would be gradual rather than instantaneous.
How SMIC reached 7 nm without EUV
The Kirin 9000S appears to have been produced using deep ultraviolet, or DUV, lithography, rather than extreme ultraviolet, or EUV, lithography. EUV systems are used for the most advanced commercial processes and allow manufacturers to pattern complex chip features more efficiently.
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That approach can work, but it carries significant disadvantages:
- more process steps and greater complexity;
- longer production cycles;
- higher manufacturing costs;
- greater demand for precision and process control; and
- potentially lower yields, meaning fewer usable chips per wafer.
In other words, reaching a 7-nanometer-class process with DUV demonstrates engineering capability, but it does not establish the economics or throughput of a comparable leading-edge process made with EUV. The Center for Strategic and International Studies has described the achievement as evidence that access to DUV systems and other foreign equipment left important gaps in the control regime.
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Loopholes, licenses and timing gaps helped preserve access
The controls operated through technical specifications, end-use restrictions, licensing rules and coordination among several governments. That left room for lawful exports, transition periods, licenses and equipment that fell outside a particular threshold.
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Some tools sold for less advanced production could also support experimentation or processes more advanced than policymakers expected. Existing equipment remained available, and controls imposed by one government did not automatically apply at the same moment to suppliers in another country.
The careful conclusion is not that SMIC simply violated every restriction. Rather, Chinese firms benefited from a combination of:
- equipment acquired before restrictions took effect;
- legal exports and approved licenses;
- differences between U.S., Dutch and Japanese rules;
- technical thresholds that did not cover every tool; and
- enforcement and implementation gaps.
That combination reduced the immediate effectiveness of a policy intended to deny China access to the most advanced manufacturing capability.
Sanctions also made localization more urgent
Export controls constrained China, but they also changed the incentives facing Chinese companies. Before the restrictions, firms could often rely on foreign suppliers for fabrication, advanced processors, electronic-design-automation software, lithography, etching, deposition, memory and specialized materials.
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After Huawei’s access to important foreign technologies was restricted, dependence itself became a strategic risk. A domestic component could be more expensive, less efficient or harder to manufacture, yet still be valuable if it reduced the possibility of a future supply cutoff.
Beijing’s response included state-backed semiconductor funds, tax support, local-government fab programs, domestic procurement preferences, engineering recruitment and efforts to use Chinese chips in phones, vehicles, networking equipment and government systems.
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This policy did not create immediate independence. It created a willingness to tolerate inefficiency in exchange for resilience. China could accept lower yields or higher costs while developing an alternative supply chain.
Huawei was more than the designer of one chip
Huawei’s role extended beyond designing the Kirin processor through its HiSilicon subsidiary. It also supplied demand for SMIC and helped coordinate designers, fabs, equipment suppliers, research institutions and government-backed programs.
That coordination matters because semiconductors are not produced by a single company in isolation. A viable chip ecosystem requires design software, intellectual property, fabrication, packaging, testing, materials, equipment, memory and product demand.
The Mate 60 Pro turned that industrial effort into a visible consumer product. It combined a Chinese-designed application processor, SMIC manufacturing and domestic 5G modem capability with other Chinese-made components. However, the phone was not entirely Chinese-made. The USCC noted that its memory components were believed to include legacy technology from South Korea’s SK Hynix, alongside other continuing foreign dependencies.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.The less glamorous source of growth: mature-node chips
Much of China’s production increase was likely driven by chips that do not require the newest manufacturing technology. Mature and legacy nodes are used in:
- automotive electronics;
- power-management circuits;
- industrial controllers;
- microcontrollers;
- display drivers;
- connectivity devices;
- sensors;
- household appliances; and
- power semiconductors.
These chips may be less newsworthy than a smartphone processor, but they are essential to modern supply chains. They can also be manufactured with equipment that is less restricted than EUV systems.
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The USCC warned that China’s equipment purchases could strengthen its position in legacy semiconductors even when much of that equipment was unsuitable for the most advanced chips. This distinction is central: higher total output can reflect a large expansion in mature-node capacity without indicating that China has closed the frontier gap.
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Why 7 nm did not equal semiconductor independence
“Domestic chip” is not a binary description. A product may be designed in China, fabricated in China and packaged in China while still relying on foreign lithography, inspection, metrology, chemicals, materials, electronic-design-automation software or specialized components.
After the Mate 60 Pro breakthrough, China still depended on foreign technology in several critical areas, including:
- lithography systems;
- etch and deposition equipment;
- inspection and measurement tools;
- semiconductor materials and chemicals;
- EDA software;
- memory components; and
- manufacturing know-how and specialized parts.
The 7-nanometer-class processor demonstrated that China could assemble enough capability to make a strategically important product. It did not establish TSMC-level yields, cost parity, wafer volume, repeatability across multiple fabs or freedom from foreign suppliers.
Those are separate tests of industrial strength. Without reliable data on yield, wafer-per-month capacity and cost per functional chip, claims that China could produce 7-nanometer chips at frontier-scale economics would go beyond the available evidence.
What the 2023 numbers say about sanctions
The evidence supports a mixed judgment rather than “sanctions failed.” Export controls did not prevent China from producing more chips or from reaching a major 7-nanometer-class milestone. They also did not instantly remove foreign equipment already installed in Chinese fabs.
At the same time, the restrictions likely made advanced production more expensive and less efficient. They narrowed China’s access to the best tools, complicated expansion at the frontier and increased dependence on workarounds such as DUV multiple patterning.
Meanwhile, the pressure accelerated domestic substitution. It gave Chinese firms and policymakers stronger reasons to fund local equipment, recruit engineers, stockpile supplies and build mature-node capacity. In that sense, export controls operated in two directions:
| China achieved in 2023 | China had not achieved |
|---|---|
| Higher total IC output | Independence from foreign lithography and manufacturing tools |
| More domestic fabrication capacity | Leading-edge cost and yield parity |
| A 7-nanometer-class smartphone processor | TSMC-level scale and repeatability |
| Greater local design and integration | A fully domestic materials, equipment and EDA ecosystem |
| More supply-chain resilience | Freedom from foreign technology dependence |
The bottom line
China’s chip production boomed in 2023 because the controls were neither immediate nor comprehensive, while Chinese companies used pre-existing equipment, stockpiling, DUV-based process engineering and massive state support to keep expanding.
The Mate 60 Pro showed that export controls could not prevent every advanced-chip breakthrough. But the broader data tell a more nuanced story: China produced more chips, especially across mature and legacy categories, even as sector revenue and profits weakened. Its semiconductor industry became more resilient and more strategically coordinated, not fully self-sufficient.
The most accurate verdict is that export controls slowed and raised the cost of China’s progress at the leading edge while simultaneously accelerating China’s effort to localize the supply chain. That is a constraint—and an incentive—operating at the same time.
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