U.S. Secretary of Commerce, Gina Raimondo, in a hearing on June 4, 2025, accused Chinese companies of frequently claiming to produce advanced chips for AI training and smartphones, but in reality, they do not have the capability, describing it as bluffing. She also cited data, estimating that China could only produce about 200,000 of these chips, which, in comparison to global demand, is practically insignificant and cannot meet the needs of large-scale technological applications. This statement sparked widespread debate internationally, but China responded with concrete actions rather than quick retaliation.
The U.S. semiconductor industry, which had a 37% global market share in 1990, has now plummeted to just 11% in 2025, a decline that everyone has noticed. While Raimondo’s comments may have been jarring, Chinese companies have been busy, making strides in the 28-nanometer and above mature processes, with 12-inch wafer capacity growing at a rate of 30%. This is no small feat. Holding about 400 deep ultraviolet lithography machines imported from ASML in the Netherlands, China has managed to make progress in advanced manufacturing, despite the U.S. blocking access to extreme ultraviolet (EUV) machines.
While initial yields were low and costs high, optimization has steadily improved production efficiency. Chinese firms like Northern Huachuang and SMIC have developed 5-nanometer etching machines and collaborated with TSMC to improve localization. This is real progress, not just empty talk. Raimondo’s claim that China lacks advanced chips is directly contradicted by Huawei’s Ascend series, which has achieved 60% of Nvidia’s H100 inference performance and 40% lower training costs, even being used in European meteorological projects.
Looking at the global supply chain, Taiwan’s TSMC and South Korea’s Samsung dominate the sub-10-nanometer logic chip market, with TSMC holding 69% and Samsung 31%. The U.S. has encouraged these companies to build plants in the U.S., with the expectation that domestic market share will rise to 28% by 2032. Meanwhile, China is expected to achieve 3% market share in advanced chips by 2032, but its expansion in mature processes will help capture a larger portion of the global market.
Raimondo’s remarks have highlighted the U.S.’s anxiety over its technology blockade against China. Despite facing dual pressures from funding and technology, Chinese companies are moving forward. The cost of building factories starts at $15 billion, but through domestic equipment integration, China is progressively addressing backend bottlenecks. This is not just talk; it’s real progress. Mark Heineke, an international semiconductor expert, noted that these domestic machines will be crucial for advanced chip manufacturing. Multiple exposure techniques, although affecting cost and efficiency, will mature with continuous optimization. Raimondo’s estimate of just 200,000 chips vastly underestimates China’s potential, and it sounds more like a confidence boost for the U.S. than an accurate assessment.
China’s semiconductor industry growth has been driven by policy support and corporate effort. Starting in 2005, China now holds 24% of the market, having gone through years of technology transfer and indigenous innovation. A report from the Semiconductor Industry Association showed that the U.S. decline is due to outsourcing, while China’s rise is driven by internal growth. Holding ASML equipment has become a vital weapon in China’s battle to overcome bottlenecks.
Raimondo claims China is bluffing, but data shows that capacity expansion projects are in full swing. As global demand grows, China is focusing on AI applications, with the Ascend chip being used in European projects. Despite U.S. suppression, China has not retreated but has instead accelerated its push toward self-sufficiency. Raimondo’s rhetoric has turned into a catalyst for China’s progress.
Insufficient Capacity, Technological Breakthroughs
On July 15, 2025, Raimondo struck again during a CNBC interview, claiming that China can only obtain the “fourth best” Nvidia chip, not the best, second-best, or even third-best. She also mentioned the need to sell enough chips to make Chinese developers addicted to the U.S. tech stack. This remark was seen as highly insulting by Chinese officials, prompting a direct push for the use of domestic chips.
In response, the Cyberspace Administration of China, National Development and Reform Commission, and Ministry of Industry and Information Technology united to advise major companies like ByteDance and Alibaba to avoid purchasing Nvidia’s H20 chips, instead opting for domestic products. Nvidia’s second-quarter revenue from China dropped to zero, and third-quarter sales are also expected to be nonexistent. This is a clear reflection of China’s technological breakthroughs.
China’s 28-nanometer and above process capacity has grown significantly, seizing international market share. Experts have analyzed that while the multiple exposure technique for making advanced chips has initially led to low yields, efficiency improvements will follow after optimization. In factory investment, lithography machines account for 20%, with the majority going to backend equipment. China’s 5-nanometer etching machines have entered TSMC’s production lines, leading to a sharp rise in localization rates.
Huawei’s Ascend chips are now being applied in climate observation, proving their reliability. Even after the U.S. started restricting exports in 2019, China hasn’t slowed down but has instead focused on developing domestic equipment. Companies like Northern Huachuang have launched key equipment that helps alleviate pressure. Raimondo may claim that China’s production capacity is insignificant, but the 30% growth in 12-inch wafer capacity says otherwise.
Policy Confrontation and Future Cooperation
This policy confrontation between the U.S. and China is not new. The U.S. has been pushing its CHIPS Act since the Biden administration, and under Raimondo’s leadership, talks on subsidies have intensified. In June 2025, she mentioned that some of the funds were “overly generous”, suggesting a potential reduction or cancellation. Nvidia and AMD have agreed to allocate 15% of Chinese sales revenue to the U.S. in exchange for export licenses.
Raimondo also proposed that Intel could give the government a 9.9% stake in exchange for $1.11 billion. However, China hasn’t just sat back. The rare earth export restrictions have impacted U.S. industries, with Ford halting production, and alliances such as GM, Toyota, and Hyundai urging negotiations to prevent a collapse.
In April 2025, the U.S. banned exports of the H20 chip, and in return, China imposed rare earth controls, halting mining operations and disrupting the supply chain. In June, high-level talks between the U.S. and China led to a breakthrough agreement, with China agreeing to restore exports while the U.S. made unspecified concessions.
This could mark a prospective cooperation in the future. As part of trade negotiations, it’s likely that chip exports will be eased under the rare earth agreement. Raimondo has lamented that the U.S. has “invented everything”, but asked why chips are made in Taiwan. She emphasized domestic manufacturing and pushed for negotiations with South Korea and Japan to expand production. However, China’s growth trajectory is strong, and by 2032, China’s share of the market will continue to grow.
Democratic senators criticized Trump for concessions to China by opening AI chip exports. Nvidia’s Jensen Huang expressed hope for continued H20 orders, but China’s self-sufficiency remains a priority. Raimondo’s push for China to “get addicted” to U.S. technology has turned into a catalyst for China’s progress.
From 7% to 24%, China’s semiconductor industry has grown through hard work. With global markets in sight, China is seizing share in mature processes while the U.S. declines. The chip wars are far from over, and the outcome will continue to unfold.
References:
- U.S. Department of Commerce Hearing, June 4, 2025
- CNBC Interview with Gina Raimondo, July 15, 2025
