The Central-Local Dynamics in Chinese Semiconductor Self-Reliance Push: Studying the Decentralization and Fragmentation behind China’s Global Technology Ambition

China’s semiconductor self-reliance push reveals the party-state’s ambition to build resilience to US containment and move away from the US-led globalization in one of the most globalized industries. Further, given the significance of chipmaking capacity to national economic and military power, whether China can achieve leadership in the global semiconductor industry would be critical to its future rise. While many commentaries focus on China’s state-led efforts to nurture domestic chip firms, this paper studies the impact of central-local relations on Chinese semiconductor policies. This paper draws on China’s policy documents, the author’s interviews with government officials and practitioners in the Chinese semiconductor industry, and existing research about the country’s chipmaking development. This paper finds that the party-state’s semiconductor policies are decentralized and fragmented across provinces. The party-state’s lack of policy coordination across provinces may debilitate its capital investment-heavy approach and hinder its advancements in the semiconductor industry, as local officials favor chip firms in their respective jurisdictions. The decentralization and fragmentation of China’s semiconductor policies cast doubt on the country’s prospects of significantly reducing its reliance on foreign advanced chips and chipmaking equipment by 2025. Therefore, this paper challenges the conventional assumption that China reinforces its power to challenge the US-led liberal international order by propelling its strategic industries with its centralized political system and state-led economic planning. Further, this paper argues that the fiscal decentralization and cadre evaluation system that the central party-state designs to meet its stability goal has unintentionally led to provincial protectionism and market fragmentation, which may hinder the local semiconductor industry from developing complex supply chain interconnectivity and achieving self-reliance. As the central party-state prioritizes stability, whether top leaders can unify the formulation and implementation of Chinese semiconductor policies without inflicting political conflicts with their subordinates would be crucial for the country’s future technology development and its competition with the US.