America's chip war with China will spread

In the continuing chip war between Washington and Beijing, the U.S. has the clear upper hand on the most cutting-edge technology.

- Jacky Wong

But on a more mundane front of the battle, China might be gaining an advantage.

Even as U.S. export restrictions have stymied China's progress in advanced chips, Beijing has been aggressively expanding production of more mature, so-called legacy chips. These aren't as sexy as the higher-end ones—such as artificial intelligence chips from Nvidia—but they are needed for such essentials as automobiles and household appliances. In fact, disrupted supply of these chips caused havoc in the car market during the pandemic.

China spent $41 billion on wafer fabrication equipment in 2024, a 29% year-on-year rise, according to Morgan Stanley. That is roughly 40% of the global total, and compares with $24 billion in 2021.