Goldman Sachs projects China to meet 66% of its own advanced chip demand by 2035

Goldman Sachs The Goldman Sachs Group, Inc. ↗ 2.18% projects that China will close much of its advanced semiconductor supply gap over the next decade, with domestic production of 7-nanometer-and-below wafers growing at a compound annual rate of 46% through 2035, according to a report released Monday.

The U.S. investment bank estimates the shortfall between domestic supply and demand for advanced-process wafers will shrink from 92% in 2025 to 34% by 2035, with China's monthly supply reaching 410,000 wafers against projected demand of 619,000.biz.chosun+1

AI-Fueled Capital Spending Surge

The expansion is underpinned by a wave of AI-driven investment. Goldman Sachs forecasts that capital expenditure in China's chip industry will reach $82 billion by 2030, a 79% upward revision from its estimate a year ago. The bank noted that Alibaba ↗ 0.82%, Tencent, ByteDance, and Baidu ↗ 1.36% are expected to collectively spend approximately $102 billion on AI-related capital expenditure in 2026, bolstering semiconductor capacity buildout.moomoo

"We remain bullish on the growth prospects for semiconductor capital expenditure," Goldman analysts wrote, citing rising AI demand, improvements in the domestic supply chain, and the industry's push toward advanced chips, advanced packaging, and memory products.moomoo

SMIC Leads Capacity Expansion

The supply increase hinges largely on Semiconductor Manufacturing International Corp (SMIC), China's largest contract chipmaker. Goldman's model assumes SMIC adds between 30,000 and 50,000 advanced-node wafers of monthly capacity each year from 2026 to 2031, then 20,000 per month annually through 2035. Production yields are expected to rise from 23% this year to 50% in 2030 and 75% by 2035.scmp+1

SMIC reported record second-quarter revenue of $3 billion in August, driven by AI-related demand that has tightened foundry capacity.mexicobusiness

A gap with Taiwan Semiconductor Manufacturing Company ↗ 1.78% (TSMC) persists. TSMC, which began mass-producing 7nm chips in 2018, achieves yields exceeding 90%.scmp

Lithography Remains the Weak Link

Goldman identified lithography equipment as the primary bottleneck. China relies heavily on ASML ↗ 0.23% for deep ultraviolet lithography machines and cannot obtain the extreme ultraviolet systems needed for finer circuits due to U.S. export controls. The bank said these equipment constraints will hinder efforts to close yield and technology gaps in advanced processes.biz.chosun

In memory, Goldman projects that ChangXin Memory Technologies could supply roughly 50% of China's DRAM demand and 40% of high-bandwidth memory demand by 2028, though it still trails Samsung Electronics and SK hynix ↗ 2.68% in advanced DRAM technologies.biz.chosun