The localization of science and technology in China has become more urgent due to frequent geopolitical issues in recent years, especially that the U.S. put many Chinese firms into its entity list, according to reports by Credit Suisse AG on Wednesday.
Technology takes up 21% of China’s imports, with US$449 billion in 2018, up 19% year-on-year. Technology has become the largest part of China’s imports.
Semiconductor imports have reached US$311 billion. It has become the largest part of imported technology, accounting for 70% of total technology imports.
Semiconductor memory imports amounted to US$122 billion, with 27% of total technology imports in 2018. Imports of other semiconductor products were worth US$189 billion, accounting for around 42% of total technology imports.
Due to the heavy reliance on technology imports, the Chinese government has introduced several policies since 2000. It aims to maintain national security, secure local supply of technical components, continuously improve China’s national strength in high-value and intellectual property and expand its talent pool.
Kyna Wong, head of Technology Research, China, Credit Suisse, said that China has achieved a lot in telecommunications equipment, hardware manufacturing, display, etc. It also has accumulated experiences in integrated circuit design focused on mobile phones and consumer products.
Although China has invested a lot in the localization of semiconductor production and design, there are few achievements other than Huawei. China still has a large gap in advanced technology for semiconductor manufacturing, and has to continue to depend on imported equipment and certain key materials for some time, Wong said.
In various specific technology fields, the reports said that China still has a long way to go in the field of semiconductor memory. Although China has accumulated strong advantages in integrated circuit design, back-end and mature foundry node in the field of semiconductor logic devices, it is still lagging in many ways. China is far behind in terms of silicon wafers and devices, which is not easy to deal with in a short term.
Chinese suppliers are strong in network in the enterprise server area, but its global server expansion may face challenges. China may dominate the thin film transistor (TFT) board and is expected to make achievements in organic light-emitting displays (OLEDs) in the field of displays, but it still lags in major tools and raw materials. In the component sector, China can be self-reliant in most areas and is expected to gain more market share in key areas.
With the development of China’s economy, China’s air transport demand has grown rapidly over the past two to three decades. China has become the largest customer of Boeing and Airbus for a long time. Credit Suisse expects that China will purchase about 900 aircraft and import 1800 aero engines from 2019 to 2021, during which the total size of China’s commercial fleet will reach 3639. The Chinese government plans to initiate the localization of aircraft manufacturing, aiming to at least partially meet the huge domestic demand.
The report said that China’s long-term economy will benefit from upgrading the overall technology knowledge reserve, achieving innovation in various fields and developing strategic industries.
However, self-sufficiency is impractical in modern manufacturing. Policymakers must ensure that China’s efforts to technology independent will not harm its cooperation with others and help its integration into the global production chain.
In addition, it is important to establish a research-specific allocation mechanism to help balance the short-term needs and long-term needs of research.