China’s integrated circuit (IC) output rose more than 41.3 per cent year on year to reach 31.6 billion units in July, a new monthly record, on the back of strong demand for semiconductors and the addition of new production capacity, according to government data released on Monday. The July output was higher than the production of 30.8 billion units reported in June, the National Bureau of Statistics data showed. In the first seven months of the year, China’s total IC output reached a hefty 203.6 billion units, up 47.3 per cent compared with the same period a year earlier. Chip production is a priority in China’s five-year plan as the country braces for a heightened tech war with the US. The value-added industrial output in computing, telecommunications and electronics manufacturing, one of the 17 main sub sectors tracked in China’s industrial output, rose 13 per cent in the last month from a year earlier, outperforming overall industrial output growth of 6.4 per cent. A global semiconductor crunch , which started in the second half of last year, is still wreaking havoc on industries from automobiles to consumer electronics, which require huge quantities of commodity chips such as power semiconductors and microcontroller units. China’s output of automobiles in July fell 15.8 per cent from a year earlier, partly due to chip supply problems, according to the statistics bureau. China’s chip expansion drive may lead to overcapacity, inefficient investment The robust market demand has also seen semiconductor fabs scrambling to add capacity, and even helped rejuvenate some unfinished projects that were beset by lack of funding. Huaian Imaging Device Manufacturer Corporation (HiDM), an unfinished fab project in Jiangsu province, was sold for 1.66 billion yuan (US$260 million) to state-backed Rongxin Semiconductor (Ningbo) Co. Ltd, in a virtual auction on July 7, which analysts said could set a precedent for restarting bankrupt semiconductor manufacturing projects in China. “This was the first unfinished, asset-heavy semiconductor project which successfully found a taker via an auction in recent years,” Gu Wenjun, chief analyst at Shanghai-based semiconductor research firm ICWise, said in a recent note. Separately, SiEn (Qingdao) Integrated Circuits Co , a foundry founded by Richard Chang, an industry veteran and founder of China’s biggest chip maker Semiconductor Manufacturing International Corporation (SMIC), recently kicked off production of 8-inch wafers in the Chinese city of Qingdao and is currently testing a new 12-inch line. The production at SiEn will add to the country’s capacity in the mature technology nodes, which are in dire need for carmakers and home appliance applications.