The state-owned China Electronics Technology Group Corp announced on Wednesday its production of domestically-made equipment to manufacture highly complex integrated circuit chips. They include a cutting-edge 28-nanometer ion implanter and a series of 200-millimeter chemical mechanical polishing equipment.

The company said in a statement that it would continue with its research and development endeavors to reduce China’s reliance on imported chips and chip manufacturing equipment. A dependence on foreign imports has long been the Achilles heel of the seemingly vibrant Chinese telecoms gear and electronics equipment sector.

A previous chips and parts embargo meted out by the Trump administration laid bare the inconvenient truth that under the veneer of bourgeoning sales at home and abroad, China’s electronic industry as a whole is still stuck at the low end of the market.

“Foreign companies not only dictate the prices but also determine the quality of products they sell to China,” said Zhang Cong, a CETC technical director, noting that foreign chip-making companies typically only sell first generation equipment to China, even though their own technologies had by now moved on to the third generation.

However, soon after CETC mastered second generation technology, foreign companies rushed to slash their prices for first generation machines and agreed to sell second generation equipment to China, according to Zhang.

CETC also delivers key components for Chinese military satellites, missiles, aircraft, vessels and vehicles.

China’s reliance on imported high-end integrated circuit chips is costing the country more than US$200 billion a year.

And even though China is making headway in chip technology, production bottlenecks and a lack of high-precision manufacturing equipment such as lithography machines means Chinese smartphone and telecom gear makers like Xiaomi, ZTE and Huawei still have to shell out a big chunk of their income to source supplies from overseas.

For instance, ASML Holding, a Netherlands-based supplier of photolithography systems and machines for the production of integrated circuits, raked in more than €9 billion in revenue in 2017.

The optical imaging that ASML’s machines deal with is used in the fabrication of nearly all integrated circuits available on the market, commanding more than half of the worldwide sales of lithography machines.