China Is Building 40% of Global Legacy Chip Capacity by 2032 While the U.S. and Europe Have No Strategy to Prevent Dependency on Chinese-Made 28nm Chips

China is projected to control nearly 40% of global wafer fabrication capacity for legacy chips (28nm and above) by 2032, while the U.S. and Europe will account for just 10% and 3% respectively. Chinese foundries like SMIC, Hua Hong, and dozens of state-subsidized fabs are aggressively expanding mature-node production at below-market prices, while the CHIPS Act and EU Chips Act focus almost entirely on leading-edge nodes, leaving legacy chip manufacturing strategically unaddressed. Why it matters: 95% of chips in automobiles and the vast majority of chips in defense systems, medical devices, and industrial equipment are legacy-node chips at 28nm and above, so China's dominance in this segment gives Beijing potential coercive leverage over every country and industry that depends on these chips, so U.S. automakers (GM, Ford, Stellantis) and defense contractors (Lockheed Martin, Raytheon) face growing supply chain dependence on Chinese fabs for components with no domestic alternative, so China could replicate Russia's energy leverage playbook by undercutting global pricing to drive out competitors (UMC, GlobalFoundries, PSMC) and then restricting supply during geopolitical disputes, so the U.S. military's readiness and the resilience of critical infrastructure sectors from power grids to telecommunications are undermined by a structural dependency that current policy does not address. The structural root cause is that the 28nm node (called the 'forever node' in industry) is extremely cost-effective and unencumbered by export controls, so China can freely purchase DUV lithography equipment from ASML and build unlimited capacity. The CHIPS Act's guardrails and investment focus on leading-edge nodes (sub-5nm) left a policy vacuum for legacy chips, and U.S./European foundries cannot compete with China's state-subsidized pricing without equivalent government support that does not currently exist.