Chinese chip and chip equipment makers blacklisted by the US are turning to universities and state-backed chip labs and “pilot production lines” to keep their development efforts on track.
Facilities in major cities from Wuhan to Wuxi to Ningbo offer vital test production and verification services that help accelerate China’s chip developments, often enjoying easier access to overseas technology, according to sources briefed on the matter.
Hubei Yangtze Pilot-Line Services, better known as Hubei Yangtze Memory Labs, in Wuhan, is just one example. Engineers from Yangtze Memory Technologies (YMTC)—the nation’s top NAND flash memory chipmaker—use the laboratory to verify new chip designs before putting them into mass production because it has a 12-inch pilot production line and better access to foreign equipment and services than blacklisted entities do, sources told Nikkei Asia.
Hubei Yangtze Memory Labs describes itself as an independent legal entity approved by the Hubei provincial government, and it is led by a government official.
YMTC was added to the US trade blacklist in 2022.
Top Chinese chip measurement machine maker Shanghai Precision Measurement Semiconductor Technology, or PMISH, has also become a key stakeholder in Hubei Yangtze Memory Labs and is focusing on advanced chip packaging projects for high-performance computing and storage, special sensors and optoelectronics integration, according to the company. PMISH, a rival to KLA of the US, was added to Washington’s Entity List last December, along with other major Chinese chip equipment makers.
Labs like this are crucial, one China-based chip industry executive told Nikkei Asia. “Some labs offer services to benchmark equipment and materials, to compare local offerings of machines with leading global standards, which are very important for domestic engineering work. … Sometimes a team, before investing lots of money, can go to these labs to prove that the product really works before putting it into mass production.”
Other examples include JFS Laboratory in Wuhan, which has built pilot production lines specializing in various types of compound semiconductors, including gallium nitride (GaN) and silicon carbide (SiC). These materials are crucial for developing highly efficient power electronics, vital for applications in the automotive, data center and aerospace sectors, areas where China sees itself as having a competitive advantage, in part because they are subject to fewer restrictions from the US.
JFS, which is backed by Hubei, said it has attracted scientists educated at top global universities including Cambridge University, Stanford University, Massachusetts Institute of Technology and Nanyang Technological University. Its many ongoing projects include helping Chinese chipmaking equipment teams verify their locally developed machines and tools for laser cutting and etching. It also has pilot production lines for silicon photonics, an area seen as a key next-generation technology for enabling faster data transmission for artificial intelligence computing.
Chip Hub for Integrated Photonics Xplore (CHIPX), operated by the prestigious Shanghai Jiao Tong University, recently launched China’s first pilot production line for high-end photonic chips, in Wuxi, Jiangsu. The line is set to provide services from the first quarter of this year.
Yongjiang Laboratory (Y-LAB) in Ningbo, Zhejiang, founded in 2021, launched a research and development production line for heterogeneous chip integration and micro-nano optics last year. It has set a target of sharply expanding its staff from 400 members last year to 800 scientists this year and 3,000 by 2030.
Several other labs with pilot production platforms related to semiconductor development have sprouted up across China over the past few years, including in Guangzhou, Tianjin, Zhengzhou, and Shenzhen. Their target areas range from sensors and chip packaging and testing to advanced materials and compound semiconductors.
Beijing has encouraged local authorities to promote more “pilot production lines” or “small-scale test production lines” run by universities or research institutes in partnership with chip and tech companies, viewing them as vital platforms for fostering the nation’s technological development.
The Chinese State Council last September issued a directive instructing all major cities and provinces to actively promote and facilitate the setup of a wide range of pilot production platforms till 2027 with specialties in different industries. This state-driven initiative is much broader than only semiconductors, as it aims to foster development across the entire value chain, from materials, metals, chemicals and machinery to cutting-edge technologies like quantum computing, robotics, AI, aerospace, and satellite navigation, according to government documents seen by Nikkei Asia.
Boosting research centers’ equipment and investment and enhancing engineering schools have become key tactics for China in its battle against US export controls, as it is much easier for research institutes to engage international collaborations and to access American and European technologies.
According to Nikkei Asia’s analysis, China has been building more chip and microelectronics schools in recent years, broadening its access to fundamental technologies and cultivating more homegrown talent since 2020.
In 2023 and 2024 alone, at least ten universities established new semiconductor schools, including North China University of Technology, Shanghai Jiao Tong University, Nanjing University of Aeronautics and Astronautics, and Harbin Institute of Technology’s Shenzhen branch, of which the latter two have been blacklisted by Washington. The specialties of these chip schools span a variety of segments, such as electronics automation design (EDA), chip production equipment, and advanced chip production.
China has also been ramping up its R&D investment, particularly since the US-China tech war broke out. According to the country’s Bureau of Statistics, nationwide R&D spending reached a record of more than RMB 3.3 trillion (USD 458 billion) in 2023, nearly double the level in 2017, the year US President Donald Trump began his first term. The US put Huawei Technologies on the trade blacklist from 2018, and later blacklisted a range of Chinese tech champions, including contract chipmaker Semiconductor Manufacturing International Corporation (SMIC) and the world’s biggest drone maker, DJI.
During the administration of former President Joe Biden, Washington continued to escalate tensions with multiple rounds of export controls, expanded trade blacklists and regulations on leading foreign chip suppliers such as Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung, curbing their dealings with Chinese clients.
Trump’s return to the White House in January has brought few signs that trade relations will improve. As new blanket 10% tariffs on Chinese goods took effect, Beijing retaliated on February 4 with tariffs of its own on various imports from the US, including energy and agricultural machinery.
Science and technology policy expert Stephen Ezell told Nikkei Asia that China is stepping up its R&D efforts and that its spending could surpass that of the US in the coming years.
“In all sectors and in overall expenditure, China [has] neared the US in R&D spending,” said Ezell, vice president for global innovation policy at the Washington-based Information Technology and Innovation Foundation, adding that it has already surpassed America in university and government funding for applied research and experimental development. “If China continues to invest heavily and if the US. finds its budgetary environment constrained, it’s certainly possible China could outstrip the US.”
But while Chinese universities and research institutes are generally subject to fewer trade restrictions, they are not immune from political tensions. In 2020, the Trump administration placed a handful of leading Chinese universities specializing in industry and space on the Entity List. These include Harbin Institute of Technology—known as “China’s MIT”—Beijing Institute of Technology, the Center for High Pressure Science and Technology Advanced Research, and Nanjing University of Aeronautics and Astronautics. Additionally, dozens of other Chinese universities and research institute were added to the US “unverified list,” meaning any exports to or collaboration with them requires stricter reviews.
Ezell said China’s international research collaborations, particularly with the US, have slowed. According to a study by Nature, over a quarter of research papers by Chinese authors involved international collaborations in 2018, but that share fell to 7.2% by 2023.
China, Ezell added, is good at forming industry clusters to facilitate the application of basic and applied research, even if there is inherent inefficiency and overcapacity in the Chinese system. “Efficiency has never been the central goal of the Chinese approach,” he said. “They are willing to accept a lot of inefficiencies to gain market share.”
“We’ve been very careful about exporting our equipment to Chinese research institutes or universities in light of the mounting export controls,” an executive with a Europe-based measurement equipment supplier, told Nikkei Asia. “For almost everything we might have to apply for an export license.”
Europe is also starting to scrutinize collaborations with China more closely, according to Mathieu Duchatel, director of international studies at the Paris-based think tank Institut Montaigne.
“In the past, the EU was not concerned about research security … and left it to member states to regulate research collaborations with international partners, but that has changed,” Duchatel told Nikkei Asia. “Last year, the EU took the initiative to put research security at the top of its agenda.” He added that the bloc is likely to draft policies targeting “problematic” entities involved in such research collaborations.
“However, China will likely find ways to get around international regulations, and establishing more of these research institutes is one way to do that,” Duchatel said.
People should not underestimate China’s capacity for innovation just because of inefficiencies in its state-driven system, he added. “The intense strategic pressure on China from the US and its allies is also a significant mobilizing force.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.