China prioritizes local chip needs during global crunch

Foreign players face capacity squeeze after recent power disruptions

20211117 China Electricity Power Line and Chip

China is wrestling with a global semiconductor shortage while attempting to increase its chip self-sufficiency -- complicated by recent power shortages across the country -- amid tensions with the U.S. (Source photo by Reuters)

CHENG TING-FANG and LAULY LI, Nikkei staff writers

November 18, 2021 16:14 JST

TAIPEI -- One of China's biggest chipmakers has warned it may have to drop orders from foreign clients next year to prioritize domestic demand, Nikkei Asia has learned, as the country pushes to build a "secure and controllable" tech supply chain.

Hua Hong Semiconductor, China's No. 2 contract chipmaker, told several of its non-Chinese clients -- including Taiwan's Holtek, a key developer of microcontroller chips -- that it will not be able to provide them with as much capacity as they may need, sources briefed on the matter told Nikkei Asia. Hua Hong warned it may even have to drop some orders from non-Chinese chip developers due to the supply constraints, the sources added, citing China's national policy to prioritize demand from local chip developers to boost supply chain resilience.