China’s chip sector accelerates growth as AI demand drives capacity expansion

Executives say rising demand for AI infrastructure is fueling faster-than-expected growth and pushing China’s share of global chip output higher.

On the Dash:

• China’s chip capacity for 22nm to 40nm nodes is projected to reach 42% of global output by 2028, up from 37% in 2026.
• AI-driven demand is becoming increasingly complex, driving the need for testing, packaging, and interconnect technologies.
• Supply chain strain and rising investment signal continued growth, with foreign firms still key in advanced segments.

China’s semiconductor industry is accelerating growth as global demand for artificial intelligence infrastructure drives increased capital spending and capacity expansion, industry executives said Wednesday.

Growth in the sector “is coming faster than expected” this year, according to Jerry Zhang, China sales head at Swiss semiconductor components firm VAT, speaking at Semicon China 2026 in Shanghai.

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China’s manufacturing capacity for chips built on mature 22nm to 40nm process nodes, commonly used in vehicles, smartphones, and electronics, is projected to reach 42% of global output by 2028, up from 37% in 2026, according to SEMI China President Lily Feng.

Artificial intelligence is also reshaping the semiconductor industry by increasing chip complexity and driving higher requirements for testing, packaging, and high-speed interconnects. Increased computing power demands tied to AI are raising the need for more advanced semiconductor testing, industry executives said.

The impact is particularly evident in optical interconnects, a key technology linking chips in data centers, for which China remains a major global supplier. Companies in the segment report strong demand, with some order backlogs extending into next year.

The AI-driven surge is placing pressure on the global semiconductor supply chain, particularly in raw materials and high-end components, as manufacturers work to keep pace with demand.

Executives and analysts said China’s large-scale manufacturing base positions it to respond effectively, with expectations for significant expansion in areas such as memory chip production.

At the same time, foreign suppliers continue to play a central role in higher-end segments of the semiconductor supply chain, particularly in specialized materials, expertise, and after-sales technical support.