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U.S. Export Controls Choke China’s Chip Ambitions: Only 200,000 Advanced Semiconductors Produced Amid Soaring Demand
By Khadija Khan
June 5, 2025
In a striking admission that underscores the mounting geopolitical tech rivalry, U.S. Commerce Secretary Jeffrey Lutnick announced this week that the United States’ export control regime has been “overwhelmingly effective” in slowing China’s ability to mass-produce advanced semiconductors. The remarks, reported by Bloomberg Law, signal a major policy success for Washington while exposing a significant bottleneck in Beijing’s semiconductor ambitions — one that could reshape the global tech and AI landscape.
According to Secretary Lutnick, China has only been able to produce approximately 200,000 advanced chips — a figure that falls staggeringly short of the millions required annually to power its growing demand for AI infrastructure, smartphones, autonomous systems, and next-generation electronics.
Strategic Decoupling in Action
The news is a direct result of a calculated and intensifying U.S. effort to limit China’s access to high-end semiconductor technology. Through a web of export controls, licensing restrictions, and international diplomatic alignment — particularly with the Netherlands and Japan — the United States has successfully stymied China’s path to self-reliance in producing chips smaller than 10nm, which are critical for advanced computation.
“China can’t make many advanced chips, and that’s by design,” Lutnick stated bluntly. “It’s not about denying growth. It’s about protecting global security and ensuring advanced technologies aren’t weaponized.”
The comment is not merely economic; it’s deeply strategic. Semiconductors — often described as the “new oil” — power not just consumer electronics but also military systems, encryption technology, surveillance tools, and AI-driven weapons platforms. Limiting access means curtailing capability.
The 200,000-Chip Reality: A Drop in the Ocean
Analysts were quick to point out how small China’s current production volume is compared to its domestic needs. Based on current estimates, China’s AI and mobile device sectors would need over 5–10 million advanced chips annually just to stay competitive with U.S. and South Korean markets. A production output of 200,000 chips represents less than 5% of that demand.
While Chinese tech giants like Huawei, Alibaba, and SMIC have made strides in chip design and some areas of fabrication, they remain heavily dependent on foreign technology — especially lithography systems from Dutch firm ASML and advanced chip-making tools from U.S.-based Applied Materials and Lam Research.
With these avenues blocked by export controls, even state-backed initiatives like China’s “Made in China 2025” plan are struggling to meet their own timelines.
China’s Response: Workarounds, But No Breakthroughs
China has responded by doubling down on domestic innovation and seeking to build an “indigenous semiconductor ecosystem.” Billions of yuan have been pumped into chip startups, universities, and national labs. The government has also explored avenues like chiplet design, less advanced node scaling, and building up domestic equipment suppliers.
However, the pace is slow and the obstacles steep.
“Without access to EUV lithography and advanced design software, China is essentially building with one arm tied behind its back,” said tech analyst Dana Wu at the Asia-Pacific Technology Institute.
While some modest breakthroughs have occurred — such as Huawei’s 7nm Kirin chip launched in 2023 — they have not reached the volume, efficiency, or performance parity needed to threaten Western dominance.
Global Implications: Supply Chains and Tech Sovereignty
The broader impact of these developments extends beyond China. U.S. allies have largely followed Washington’s lead in tightening semiconductor exports, but not without cost. South Korea, Japan, and the EU are also facing pressure to balance trade relations with China against security alliances with the U.S.
At the same time, global firms are reevaluating their supply chains. Apple, Nvidia, and Qualcomm have shifted some manufacturing out of China to India, Vietnam, and Mexico, aiming to hedge against political risk and maintain access to Western subsidies like those in the U.S. CHIPS Act.
This global repositioning is part of what Secretary Lutnick calls “techno-strategic alignment” — a new geopolitical norm where semiconductors are the frontline of national power, not just commerce.
The Road Ahead: AI Arms Race Accelerates
As the AI arms race accelerates, the disparity in chip production capabilities is expected to widen the gap between global tech leaders and followers. With OpenAI, Google DeepMind, Microsoft, and other Western firms rolling out increasingly sophisticated models, the need for ultra-high-performance chips has never been greater.
China, despite massive ambition and centralized support, risks falling behind. And without a robust supply of 5nm, 3nm, or even 2nm chips — the future nodes for AI supercomputing — the nation could lose its competitive edge in the very fields it sees as critical to national security and global influence.
A Policy Win — For Now
The Biden and subsequent administrations have treated semiconductor dominance as a pillar of national policy. In that sense, the current state of China’s chip production validates years of planning and enforcement.
But officials remain cautious. Lutnick emphasized that the fight is far from over. “China is not giving up,” he warned. “And we’re not slowing down.”
The real question is not whether China can build 200,000 chips — but whether the U.S. can maintain its lead in the face of determined, resourceful opposition.