Goldman: China advanced chip supply to surge 46% CAGR by 2035
Synopsis
Goldman Sachs forecasts China's advanced chip supply will grow at a 46% compound annual rate through 2035, narrowing its self-sufficiency gap from 92% to 34% — but lithography shortfalls mean full semiconductor independence remains out of reach.
Key Takeaways
Goldman Sachs projects China 's advanced-node wafer supply will grow at a 46% CAGR from 2025 to 2035 , far outpacing domestic demand growth of 17% CAGR .
The supply-demand deficit for advanced chips is forecast to narrow from 92% in 2025 to 34% by 2035 , with supply reaching 410,000 wafers per month against demand of 619,000 .
SMIC is expected to add 30,000–50,000 advanced-node wafers of monthly capacity annually from 2026 to 2031 , then 20,000 wafers per month per year through 2035 .
Production yields at SMIC are projected to climb from 23% in 2026 to 75% by 2035 , compared with TSMC 's yields that can exceed 90% .
Lithography remains the critical bottleneck, with ASML EUV systems blocked by Washington 's export controls and Shanghai Micro Electronics Equipment Group (SMEE) yet to close the technology gap.
Goldman Sachs projects that China's supply of advanced semiconductor wafers — those manufactured at 7-nanometre and below process nodes — will expand at a compound annual growth rate of 46 per cent between 2025 and 2035, dramatically narrowing the country's chip self-sufficiency gap even as lithography equipment shortfalls keep full semiconductor independence out of reach.
The supply-demand gap narrows sharply
According to a Goldman Sachs report published on Monday, 24 August 2026, domestic advanced-node wafer supply is forecast to reach 410,000 wafers per month by 2035, against projected demand of 619,000 wafers per month. That would shrink the supply-demand deficit from 92 per cent in 2025 to 34 per cent by 2035 — a significant structural shift, though a gap that still leaves China reliant on external sources for a meaningful share of its advanced chip needs.
Domestic demand for advanced chips is itself expected to grow at 17 per cent annually over the same period, reflecting the accelerating buildout of artificial intelligence infrastructure, consumer electronics, and telecommunications across the country.
SMIC's expansion is the central driver
Semiconductor Manufacturing International Corp (SMIC), China's largest contract chipmaker, is the cornerstone of Goldman's projections. The bank's model assumes SMIC adds between 30,000 and 50,000 advanced-node wafers of monthly capacity each year from 2026 to 2031, followed by an additional 20,000 wafers per month annually through 2035.
Yield improvements are equally critical to the outlook. Goldman assumes production yields at SMIC rise from 23 per cent in 2026 to 50 per cent in 2030 and 75 per cent by 2035. By comparison, Taiwan Semiconductor Manufacturing Company (TSMC) — the world's leading foundry, which began mass-producing 7nm chips in 2018 — achieves yields that can exceed 90 per cent, depending on chip design and die size.
Why it matters: lithography remains the weak link
Despite the bullish supply trajectory, Goldman Sachs analysts flag lithography as the persistent bottleneck constraining full semiconductor independence. China's domestic lithography champion, Shanghai Micro Electronics Equipment Group (SMEE), has yet to match the extreme ultraviolet (EUV) capabilities of Netherlands-based ASML, the sole global supplier of the most advanced lithography systems. Washington's export controls have effectively blocked Beijing from accessing ASML's cutting-edge equipment.
The gap in lithography technology means that even as capacity and yields improve, the process nodes achievable without foreign equipment may remain a generation or more behind the global frontier, according to analysts.
The competitive backdrop
TSMC and its ecosystem partners continue to push process technology well beyond 7nm, with volume production at 3nm and development underway at 2nm and below. Huawei Technologies, which has emerged as a key domestic customer for SMIC's advanced nodes following its own blacklisting from US supply chains, is among the companies most exposed to whether China's foundry ramp materialises on schedule.
What's next
The pace of SMIC's capacity additions and the trajectory of domestic lithography development at SMEE will be the two variables most closely watched by industry observers over the next 18 to 24 months. Any acceleration in China's equipment self-sufficiency — or further tightening of US-led export controls — could materially shift Goldman's projections in either direction.
Point of View
But the fine print reveals a story of constrained ambition rather than triumph: even under optimistic yield assumptions, China would still face a 34% supply shortfall in advanced chips by 2035 — and that gap sits precisely where the most strategically sensitive applications, from AI accelerators to advanced communications, reside. The lithography bottleneck is not incidental; it is structural, and Washington's export-control regime is specifically designed to keep it that way. What mainstream coverage often underweights is the yield trajectory: moving from 23% to 75% in under a decade is an extraordinarily aggressive assumption that presupposes both equipment workarounds and a domestic talent base that has yet to be fully proven at scale. The more consequential variable to watch is not capacity — it is whether SMEE can deliver a credible domestic alternative to ASML's deep-ultraviolet tooling before the next round of US controls closes that door too.
NationPress
24 Aug 2026
Frequently Asked Questions
What did Goldman Sachs say about China's advanced chip supply?
Goldman Sachs said in a report dated 24 August 2026 that China 's advanced chip supply — covering 7-nanometre and below process nodes — is set to grow at a 46% compound annual rate between 2025 and 2035 . The bank projects domestic supply will reach 410,000 wafers per month by 2035 , narrowing the supply-demand gap from 92% to 34% .
Why can't China achieve full semiconductor independence?
China cannot achieve full semiconductor independence primarily because of lithography equipment shortfalls. Washington 's export controls block access to ASML 's advanced lithography systems, and domestic supplier Shanghai Micro Electronics Equipment Group (SMEE) has not yet matched those capabilities, leaving a technology gap that constrains the most advanced process nodes.
What is SMIC's role in China's chip ambitions?
Semiconductor Manufacturing International Corp (SMIC) is the central driver of China 's advanced chip expansion. Goldman Sachs assumes SMIC will add between 30,000 and 50,000 advanced-node wafers of monthly capacity each year from 2026 to 2031 , with yields rising from 23% in 2026 to 75% by 2035 .
How does SMIC compare to TSMC in chip production?
TSMC , the world's leading foundry, began mass-producing 7nm chips in 2018 and achieves production yields that can exceed 90% . SMIC 's yields are projected by Goldman Sachs to reach 75% only by 2035 , indicating a persistent technology and efficiency gap between the two foundries.
Who is most affected by China's chip supply gap?
Companies dependent on China 's domestic advanced-node supply — including Huawei Technologies , which relies on SMIC after being cut off from US supply chains — are most exposed. A 34% supply shortfall by 2035 means strategically critical sectors such as AI infrastructure and advanced communications will still require external sourcing or workarounds.
