China’s Semiconductor Breakthrough: From Hardship to Industry Leadership (Part II)

SWOT Analysis

Hello everyone, I’m Song Shiqiang from Kinghelm, often called the “street economist” of Huaqiangbei. As the saying goes, “Diamonds may be far apart, but good stories travel far and wide.” Let’s take a relaxed dive into some insights—this time through a SWOT analysis.

When it comes to China’s integrated circuit industry, the strengths are clear: a huge market and rapid growth. Yet weaknesses remain obvious. Foundations are still relatively fragile, many companies are small, scattered, and less competitive—typical of an industry still in early development.

But the opportunities are enormous. First, there’s immense room for growth; past underdevelopment has turned into a unique advantage. Second, external technological restrictions have mobilized national efforts, making domestic substitution a major opportunity.

However, threats are very real. The semiconductor industry demands massive capital and has extremely long return cycles. Only a few companies persist to the end. Early on, many rushed in without rational planning or long-term commitment, and in the end, only a few saw profits, while some even disrupted the ecosystem.

Over the years, waves of trendy sectors—smart manufacturing, drones, robotics, BeiDou (BDS/GPS), wearables, AI, and VR—have emerged. Yet few truly generated profits. Take BeiDou, for example. At Kinghelm (www.kinghelm.net), we invested continuously—from navigation modules to antenna cables, WiFi antennas, 4G/5G antennas, and connectors. Only after years of persistence have we started seeing returns.

Back then, many BeiDou ecosystem companies were absorbed by large state-owned enterprises in defense and aerospace—or simply disappeared. And I, Song Shiqiang, remain steadfast—gritting my teeth and moving forward as an entrepreneur determined to stay in the game.

 

1. Strengths Analysis

China’s market size stands out as the first major strength. Mainland China has steadily grown into one of the world’s largest consumer markets for electronic products. At the same time, as Professor Wang Zhihua from Tsinghua University once noted, a significant portion of electronics made in China is exported worldwide.

This combination of massive domestic demand and global reach creates a powerful engine for technological and industrial upgrades. With parts of R&D already in place, advanced ideas can be implemented and commercialized more efficiently, while a deep pool of talent is trained in the process. Exchanging market scale for talent, development, and technology—now that’s a strategic advantage that pays off.

 

The second strength is China’s rapid economic growth. Over the past decade, China has consistently ranked among the fastest-growing economies in the world and is now the second largest by scale. More importantly, this growth is healthy and compound, driven by coordinated development across entire industrial and supply chain ecosystems. This creates a positive, self-reinforcing cycle that fuels R&D investment, talent accumulation, and capital inflow—critical drivers for the integrated circuit industry.

The third strength circles back to China’s massive consumer market. As Song Shiqiang from Kinghelm—known in Huaqiangbei as the “most hardcore street economist”—I’ve seen this firsthand. During the pandemic, when Huaqiangbei’s electronics markets temporarily shut down, many vendors simply moved to roadside stalls. Why? Because the domestic consumer base is enormous. Premier Li Keqiang highlighted during the Two Sessions that around 600 million people earn less than 1,000 RMB per month, with estimates suggesting nearly 900 million earn under 2,000 RMB—numbers comparable to the entire population of Europe. By deepening reforms, encouraging creativity, and freeing economic potential, China’s growing incomes and consumption upgrades are poised to unlock a powerful new wave of economic growth.

 

The fourth strength is China’s enormous potential for progress. Starting from a relatively low base and facing a significant gap with developed economies in Europe, the U.S., and Japan, there is ample room to learn, adopt, and improve. By absorbing global lessons, China can avoid costly trial-and-error and even achieve “leapfrog” development.

Momentum is already building. With such a massive scale, the force behind progress is immense—what internet insiders describe as “pushing a boulder from a great height,” or, as Lei Jun famously put it, “even a pig can fly when it catches the wind.” Today, both Kinghelm and Slkor are riding that very wave, leveraging this momentum to drive innovation and industrial growth.

2. Weaknesses Analysis

The first weakness is the relatively weak foundation. Before the founding of the People’s Republic of China, the country was impoverished and industrially underdeveloped, with almost no modern industrial base. After 1949, China adopted the Soviet-style industrial system—a point highlighted by Professor Zhou Zucheng of Tsinghua University’s Department of Microelectronics. Professor Zhu Yiwei also notes that China’s integrated circuit industry actually started early: in the 1950s and 1960s, it even outpaced Japan and South Korea in certain areas. However, limited national resources and the disruptions of the Cultural Revolution caused the industry to fall behind. After reform and opening-up, China began catching up, and the third wave of global industrial transfer further accelerated progress. Yet true development still requires long-term accumulation across technology, talent, and infrastructure. For those interested, Professor Zhu Yiwei’s book 50 Years of the Integrated Circuit Industry provides an in-depth history.

The second weakness lies in intellectual property protection. IP awareness has historically been low, with imitation or even plagiarism of foreign technologies often occurring without proper digestion or innovation. This not only creates international friction but also limits domestic progress. Within China, small and medium-sized enterprises often lack IP knowledge or enforcement measures, reducing incentives for fundamental research and original innovation. When imitation dominates, products homogenize, sparking destructive price wars that benefit no one. At Kinghelm, we dedicated years to developing original patents for BeiDou GPS antenna connection cables. As my friend Dr. Williams once remarked, widespread piracy of Microsoft Office in China made it difficult for domestic alternatives like WPS—even free models—to achieve large-scale adoption.

The third weakness is the lack of long-term commitment. Today’s fast-paced social atmosphere favors short-term gains and instant results. Speaking frankly, much of the content on short-video apps or news feeds is low-value, designed for clicks rather than substance. But true progress demands patience. Even in my own livestreams at Huaqiang Lecture Hall and on LCSC, I focus on real technology—sharing insights in a way that is engaging yet educational. Achievements come from long-term, steady effort. In the semiconductor industry, catching up and surpassing competitors requires persistence. Even giants like TSMC continue evolving—Morris Chang, well into his 80s, remains dedicated to innovation and strategic adjustments.

 

Mr. Song Shiqiang of Kinghelm during a livestream

Let me add a personal note. On my way to work today, my old car was nearly sideswiped by a delivery rider going the wrong way. My social media feed was clogged with trivial celebrity gossip. In the elevator, people were glued to mobile games. When I turned on my computer, pop-up ads flooded the screen promoting questionable health products. During a meeting, I received 18 automated calls trying to sell loans. A simple online search returns hundreds of low-quality results. One has to ask—shouldn’t “do no harm” be the baseline for these so-called tech companies? With this environment, how can we realistically expect to produce innovations on the level of Google’s Android or Elon Musk’s Falcon rockets?

The fourth weakness is the lack of strategic planning. The semiconductor industry requires massive investment, yet often becomes a showcase for local governments eager to demonstrate achievements. This can result in excessive and disorderly competition for projects. At the national level, planning, approval, and coordination have sometimes been unclear. A friend in Beijing mentioned that between April and June this year alone, around 20 semiconductor production lines were launched, many focusing on IGBTs and third-generation semiconductors like silicon carbide (SiC) and gallium nitride (GaN)—a scenario reminiscent of past solar and wind energy booms. The semiconductor industry demands extreme levels of capital, talent, ecosystem support, and supply chain coordination. Overinvestment can easily lead to unfinished projects and wasted resources, ultimately burdening the state and taxpayers, wasting national resources, and consuming precious time.

As a seasoned IC trader in Huaqiangbei once said bluntly: “When profit is pursued too urgently, virtue is often lost.” Without the right mindset, truly great products cannot be created. Watching this unfold is, frankly, frustrating.

3. Opportunities

The integrated circuit industry is brimming with opportunities—and that’s why I, Song Shiqiang of Kinghelm, keep pushing forward with grit and determination. First, the growth potential is enormous, offering space for bold innovation. Second, external technological restrictions create a unique chance for domestic substitution. Third, China’s industrial ecosystem is increasingly complete, providing solid foundations for scaling and collaboration. And fourth, the sheer scale of available investment gives ambitious companies the fuel to turn ideas into reality.

 

The first opportunity lies in sheer growth potential. Despite rapid domestic progress, a significant gap remains between China’s semiconductor value chain and global leaders. In the U.S., companies like Texas Instruments, Qualcomm, and Intel are far ahead, while in high-end analog and RF components, Xilinx, ADI, and Skyworks dominate. Domestic firms, however, are catching up. Take Beijing-based Kingsemi (Jingwei Qili) as an example—led by Dr. Wang Haili, my junior at school, the company has faced ups and downs but persevered, gaining both market and investor recognition. Other emerging ecosystems, like Unigroup Tongchuang and GaoYun Semiconductor, are also thriving. The real growth space lies in bridging the technology gap with the U.S., amplified by China’s massive domestic market. Today, with over 1,800 IC design companies—many publicly listed—the momentum for innovation and expansion is undeniable.

The second opportunity emerges from external technological blockades. Surprisingly, these restrictions create advantages: they trigger national policies that favor the IC industry and carve space for domestic substitution. For example, Slkor (www.slkoric.com) develops silicon carbide products and MOSFETs for appliances and power tools, with many customers already testing samples. These blockades push local companies to develop high-end, competitive products, gradually upgrading technology and capturing market share. In Changsha, Hunan, Zhongyi Lihua (www.ccfeihua.com), founded by former National University of Defense Technology researchers, leverages RISC-V architecture, free from U.S. IP constraints. They are shipping low-power voice chips for smart lighting and home devices, optimizing instruction sets and customizing architectures to client needs—showing how “independent and controllable” development is now a strategic reality for China’s tech sector.

SLKOR MOSFET product series

The third opportunity lies in China’s relatively complete industrial ecosystem. Within my Kinghelm network, I often hear from industry experts like Dr. Bryant, who points out that out of over 1,300 industrial classifications recognized by the United Nations, China has around 700—a remarkably comprehensive system. During the pandemic, Chinese manufacturers quickly scaled production of masks, gloves, ventilators, and even the machinery to make them. This agility is a direct result of a full industrial ecosystem, where resource alignment and active social organization create a powerful advantage for IC development.

Even within technical circles, human networks matter. Friends like Bao Shu and Wang Zijian bring energy, humor, and insight to discussions—proving that collaboration and connection are as valuable as technical skill. As the saying goes, “Men and women together, chatting is never tiring.” In the world of ICs, a lively, connected network can accelerate innovation.

Finally, China has enormous capital resources to support growth. The first phase of the National Integrated Circuit Fund alone invested 120 billion RMB in major projects. Rapid economic expansion has also created significant private wealth seeking productive investment, which, when properly guided, can fuel IC startups. Domestic companies like Xiaomi and Vivo are now developing mobile phone chips, Alibaba has been advancing Pingtouge for years, and Huawei is rolling out HarmonyOS (HMS). Salaries for IC professionals are rising, with recent graduates reportedly earning around 300,000 RMB annually.

As the old saying goes, “The U.S. has the stock market, China has real estate”—and I can attest to the truth in that from experience. Friends like Jason Fan, CEO of Xinshiye in Poxian, point out that China’s stock market is particularly favorable for IC companies. Companies like SMIC have quickly stepped in to support domestic capital, and in recent years, IC companies have represented a significant share of IPOs, injecting substantial funding into the sector. The combination of talent, infrastructure, and capital positions China to accelerate the development of its semiconductor industry.

4. Threats / Challenges

The biggest challenge in the integrated circuit industry is the sheer scale of investment required. A single foundry can cost tens of billions of RMB—or even billions of USD for advanced, late-stage facilities. Take SMIC, for example: despite years of massive investment, profitability has only recently begun. Human resources, technology, and infrastructure inputs alone are immense.

In my own journey with SLKOR Technology, the commitment required is equally staggering. Some investors are serial entrepreneurs, some come from real estate, and I—Song Shiqiang—am what you might call a “serial property-selling entrepreneur” who persists. Developing new products, building brands, and opening new markets all demand enormous dedication and resources.

A few years ago, I wrote about an engineer near Shenzhen’s Nanshan Science Park who sold his house to start a company. Ten years later, he earned just enough to buy it back. That story’s first protagonist was me; as for the next chapter… who knows where I’ll be? But one thing is clear: I must keep pushing forward, telling stories, promoting innovations, and selling more MOSFETs to stay in the game.

 

The second challenge is the long development cycle. Take SLKOR as an example—it has been five or six years in operation and is still not profitable. Many people approach business like running a street stall: set up your stand, and you must earn money immediately. But the integrated circuit industry requires long-term investment and accumulation—of talent, technology, equipment, and market presence. Professor Zhou Zucheng from Tsinghua University reminds us that China’s IC industry needs the sustained efforts of multiple generations to catch up. From the first wave of returning engineers like Chen Datong, Wu Ping, Wei Shaojun, Zhu Yiming, and Deng Feng—who gave up lucrative positions abroad—to the second wave, including graduates like Zhao Weiguo, Yu Renrong, Lü Huang, Gao Feng, Zhao Lixin, Liu Weidong, and SMIC’s Zhao Haijun, and now the third wave of recent overseas returnees and entrepreneurs—each generation plays a vital role. Only through persistent effort can China steadily close the gap and eventually surpass international standards in integrated circuits.

The third challenge is uncertainty. Large investments and long cycles naturally create unpredictability—market fluctuations, changing returns, and environmental shifts all contribute. Entrepreneurship always demands effort and sometimes a touch of luck. Fortunately, the IC sector remains a strong track with sufficient runway for experimentation. Regarding national IC fund investments, a friend in my Kinghelm circle, Dr. Williams, joked in our BDS666 WeChat group that with new materials funds, sometimes 3–4 years pass without a single investment. Many fund managers prioritize financial metrics over industrial insight, yet most new materials startups start unprofitable or even operate at a loss initially. Government backing and thoughtful policy guidance are therefore essential, as accurate assessment and strategic investment can reduce uncertainty for startups.

The fourth challenge is homogeneous competition. There’s a saying: if one entrepreneur opens a gas station in the desert, others might choose complementary businesses like a pizza shop or an inn, and all can profit. But if multiple Chinese entrepreneurs copy the gas station, they all risk failure. Without differentiated thinking, businesses struggle to survive. Local governments can fall into the same trap. For instance, if Nanjing builds a wafer fab, then Xi’an and Chengdu might follow suit, duplicating technology and market strategies. The result? Insufficient market for all, wasted resources, and financial loss—a major issue for the industry.

SLKOR IGBT product series

Hardship and Glory

1. Obstacles and Difficulties

The first major obstacle is that several critical nodes in the industry chain are being restricted—a situation we often call a “bottleneck.” This includes EDA software, essential raw materials, cutting-edge equipment like ASML lithography machines, and advanced processes and technologies. Europe and the U.S. have coordinated sanctions, meaning some equipment and technology simply cannot be sold to us, regardless of price.

The second challenge is the weak industrial foundation. For thousands of years, China’s economy was primarily agricultural, so our industrial base remains relatively thin. While some sectors have scaled up in recent years, quality and precision still lag behind, requiring gradual accumulation. For example, steel production has increased in volume, but the focus now is on high-precision, advanced applications. Industrial software, databases, operating systems, and tools are still far behind global leaders like GE, Siemens, Oracle, SAP, Microsoft, and Android. Even our “industrial mother hens”—machine tools—show a significant gap. Take Shenyang Machine Tool: despite being advanced domestically, experts say it is roughly 40 years behind Japan’s Fanuc in static performance. Precision measuring instruments, like coordinate measuring machines, also lag far behind Germany’s Zeiss.

The third issue is weak basic research. Huawei’s Ren Zhengfei has pointed out that in chip development, China lacks mathematicians, chemists, and physicists—the foundation in basic research is thin. Universities are restless, with few teams pursuing fundamental research, as it rarely yields immediate industrial results and government support is limited. Many labs are created to boost project GDP rather than real innovation. In such an environment, foundational research takes a backseat to publishing papers, career promotion, securing subsidies, earning a living, buying homes, or paying for children’s tutoring. From my perspective as Song Shiqiang of Kinghelm, we even lack aestheticians and philosophers. Look at Apple’s products—they are elegant, clean, and intuitive, often requiring no manual. To foster world-class innovation, government guidance and evaluation systems must evolve accordingly.

 

SLKOR Hall sensor product series

The fourth issue is the lack of craftsmanship. Building a product—from achieving functional performance to ensuring long-term stability, from prototype to mass production—requires patience, precision, and iterative refinement. Excellence demands true craftsmanship. Yet society moves at lightning speed; sustaining this pace while producing high-quality products is a major challenge and a fundamental tension in the industry.

The fifth issue is that China has not fully integrated into the global industrial mainstream. Since joining the WTO, Chinese products can more easily reach international markets, but much of this work remains as contract manufacturing—the hard, labor-intensive tasks. Companies with true design and R&D capabilities, like Huawei or DJI, are still rare. Imagine if China had 10, 20, or even 50 companies of that caliber—what a transformative difference it would make. Today, the Chinese stock market is dominated by banks and state monopolies, which have thrived at the expense of small and medium enterprises. Leading tech giants like Alibaba, Baidu, Tencent, 360, Toutiao, and Meituan often leverage SMEs to their advantage. By contrast, the top U.S. tech companies hold unimaginable wealth, comparable to that of entire nations.

2. Light and Glory

After years of hardship, the future of China’s integrated circuits is undeniably bright. Despite past setbacks, China is now taking the IC industry seriously. Once attention is paid, gradual progress follows. Previously, the capability was lacking, but today, conditions are steadily aligning. Our society is naturally hardworking, efficient, and success flows from diligence. Compare this with Europe or South America—some excel at football, but in integrated circuits, China is poised not just to catch up, but to surpass.

China’s ability to mobilize is extraordinary, backed by strong national capital. The IC industry demands both capital and technology. South Korea and Taiwan succeeded because their governments poured resources relentlessly into the sector. China has both the money and the organizational power, accelerating industrial development. The pandemic response—mobilizing society as if at war—demonstrated this capacity clearly.

Latecomer advantages in population, talent, and market size also play a huge role. Take Shanghai, for example: it has twice the land and population of Tokyo, yet its GDP is only half. This highlights the massive growth potential still ahead.

SLKOR thyristor product series

In integrated circuits, Moore’s Law and Shannon’s Law are nearing their limits. It feels like a wall is ahead—but while we still have distance to cover, our competitors are slowing. With China’s scale and systemic advantages, we don’t just aim to catch up—we can surpass them.

Five thousand years of continuous history and a great civilization give the descendants of Yan and Huang the strength to stand tall among nations. Chinese culture has never been broken, civilization has never paused, and the nation has never fragmented—qualities unmatched anywhere. True competition among nations is ultimately decided not by military might, economy, technology, or resources, but by culture. We are inspired to see overseas Chinese across five continents, reciting Tang poems and Song lyrics in dialects from north to south, remembering “the moon of the Qin dynasty and the passes of the Han.” Culture endures; spirit lives on.

May all of us in the integrated circuit industry work even harder, striving for a stronger China and a better life for our people!