The PLA at Home and Abroad - Strategic Studies Institute - U.S. Army

United States but failed. It then turned to the Taiwanese
strategy, a Merchant-Foundry model, where
design and production of chips were specialized and
separated into separate systems. This attempt was not
successful either leaving China’s chip makers disconnected
and atomized. The result is that while China’s
domestic semi-conductor market is now worth 540 billion
yuan, 80 percent of chips are still imported. That
should be a sobering conclusion for the military, considering
it is two to three generations behind the civilian
sector in IT sector and depends highly on semiconductors
and integrated circuits for most weapon
categories (see Figure 1).
Weapon system Naval vessel Vehicles Aircraft Missiles Satellites
IC as % cost of unit 22% 24% 33% 45% 66%
Figure 1. Percentage of Semi-Conductors and
Integrated Circuits per Weapons Category.
The industry is looking to the military to play a
role in securing central funding for larger projects, as
it does through numerous dual-use basic research and
application projects such as 863, Torch, 909, etc. But
the government has become more resistant to providing
significant central funding to major private sector
dominated industries, including semi-conductor production.
This is being partly redressed by the NDRC’s
recent decision to make 40 billion yuan available for
“core electronic components, high-end general-use
chips, and fundamental software.” 150 In short, it is
imperative to the military that the civilian industry
succeeds. Yet, the defense industry’s progress in CMI
depends on a relationship that allows the private sec-
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