The writer is the author of ‘Chip War’, a professor at the Fletcher School, a nonresident senior fellow at the American Enterprise Institute and a partner at Greenmantle

On a recent quarterly earnings call, the chief executive of Semiconductor Manufacturing International Corporation, China’s leading chipmaker, predicted a “global supply glut” in the types of semiconductors his company produces. Simultaneously, he announced a $7.5bn increase in capital expenditure.

It may defy business logic but, helped by generous subsidies, China’s chipmakers are ramping up production capacity despite concerns about oversupply. According to one consultancy, the country’s chip production capacity will grow by 60 per cent in the next three years, and could double over the next five. Since western restrictions on the exports of chipmaking equipment to China mean that it can’t produce the most advanced processor chips, much of this production will be of foundational processor chips, which are widely used in cars, household goods and consumer devices.