Unfortunately "incredibly behind" can be said about most countries of the world, many of which had electronics industries that have been destroyed during the nineties of the last century, but not about China.
China is already able to design and fabricate good enough CPUs, GPUs, DDR5 memories and flash memories.
For now, their fabrication costs are significantly higher than those of TSMC, Intel or Samsung, because they have to use expensive workarounds for not having access to EUV lithography.
Nonetheless, where the price does not matter much, like for supercomputers or military technology, China can afford to match or exceed the US capabilities with their internal production. With the high current prices for memories, the Chinese memory companies can obtain excellent profits with their products. Which is why the US congressmen John Moolenaar (R-MI) and George Whitesides (D-CA) have requested a ban on Chinese memories, presumably at the request of Micron, who is scared of the competition.
For now, China is even ahead of Japan, though hopefully that will change soon if the Japanese Rapidus meets its targets.
While Europe is the best in a few niche domains, it has a lot of things that cannot be done within its borders, so it is much less self-sufficient than China in electronics technology.
> Nonetheless, where the price does not matter much, like for supercomputers or military technology, China can afford to match or exceed the US capabilities with their internal production
No they can’t. They are seriously compute constrained and no amount of money will close the gap in the short term. The chip export controls have been incredibly effective in that regard.
I don’t have much input on US companies buying Chinese memory but there are more bottleknecks than just memory.
Their production capacity is constrained, but not so constrained as to prevent them to demonstrate a supercomputer faster than any US supercomputer, made with custom CPUs designed and fabricated in China.
The limited production capacity means that they will not become exporters of CPUs or GPUs any time soon, but it does not mean that they cannot satisfy their internal necessities in any critical sectors. The technology that they use for CPUs and GPUs is about at the level that TSMC was 5 years ago. That may seem much, but there are a lot of people who are quite satisfied with computers older than that, and do not intend to upgrade them soon.
The main consequence of the older technology is a higher power consumption, because otherwise their designs are quite up-to-date in the attainable throughput. Therefore their datacenters must consume more energy, but that is hardly a problem in China.
The chip export controls have only forced them to design and fabricate their own CPUs and GPUs, instead of buying them from USA, and now they have become able to do this.
Without USA forcing them to do this, they might have remained dependent on imports from USA for decades, but now USA has lost the opportunity to ever play this card again. Thus USA has lost a leverage that could have been useful in a real conflict.
Such export controls are effective only for a short time, so they must be used only when there is a clear immediate goal.
China can produce chips at "7nm", that's more like 8-10 years behind. My M1 macbook pro is 6 years old, and that chip was made using a "5nm" process. The advanced US chips are now on "2nm". Explain to me how China is going to produce a computer that beats US supercomputers using 10 year old technology.
And China has invested immensely in sovereign chip industry for a long time and is still incredibly behind.