China positions itself to lead in future technologies like photonic chips

China is betting on next-gen chip architectures like photonic chips, while simultaneously trying to catch up with the West in silicon-based chips. In June 2025, CHIPX, the Shanghai Jiao Tong University Chip Hub for Integrated Photonics, announced the completion of a thin-film lithium niobate (TFLN) photonic chip production line, the first of its kind globally. This is still a research line, although its annual capacity of 12,000 6-inch wafers exceeds that of similar lines in Europe. 

Beijing has been investing in alternative chip materials and architectures since the late 2010s as it seeks to leapfrog and circumvent Western export restrictions on key chipmaking equipment like Extreme Ultraviolet machines (EUV). Similar to silicon carbide-based power semiconductors, these photonic chips use larger node sizes and can be produced using older machinery plentifully available in China. In addition, photonic chips are often built using similar techniques to fiber-optic cable production and lasers, technologies China has strengthened in recent years.  

China is not the only country pursuing photonic chips. As the world may now be approaching the physical limits of silicon-based chip performance, photonic chips are seen as a solution, especially due to their energy efficiency. Europe in particular is focusing on photonic chips, because manufacturing these would make use of European strengths in material sciences, laser technology and foundational semiconductor production. For example, Belgian start-up Thema Foundries has just announced it will turn the country’s last chip fab, originally designed for GaN-based power chips, into a photonic chip fab. The Netherlands is also building up a pilot production line to develop photonic chips.  

China looks set for a leading role in photonic chips. If these chips fulfill their promise, they can be useful for both quantum computing and AI datacenters, two key strategic priorities that are at the center of global power competition with the United States currently. While Western players like Intel have struggled with the take-up of their innovations, Beijing can leverage China’s large domestic quantum and AI industries. 

Antonia Hmaidi, Senior Analyst, MERICS: “As China lags behind in traditional, silicon-based chips, the country is identifying technologies to leapfrog. Photonic chips fit the bill, because they promise to be useful for critical technologies like AI and quantum computing, and because they build on China’s strengths in fiber-optics and laser technologies.”