In a remarkable uptick, Chinese imports of chipmaking equipment witnessed an astonishing 90% surge in the last quarter, reaching a total value of $8.7 billion, as reported by Nikkei’s analysis of Chinese customs data. Notably, lithography equipment imports experienced an unprecedented fourfold increase, with a sixfold surge from the Netherlands alone, following the imposition of export controls by the Dutch government in September.

ASML, a leading player in lithography equipment, saw China’s share in its sales skyrocket to 46% last quarter, a substantial leap from 14% in 2022. Despite concerns that these imports might be used for high-end semiconductor production, ASML’s CFO emphasized that the shipments were designated for mid-critical and mature production processes, circumventing the advanced semiconductor sanctions.

The geographical breakdown of imports indicates a shifting landscape. Japanese imports increased by 40%, with contributions from Tokyo Electron’s specialty in lithography and etching equipment. Meanwhile, imports from the U.S. grew by 20%, although the American share dropped to 9% from 17% in 2021. Dutch imports surged to 30%, and Japan’s share declined to 25% from 32%.

Export restrictions imposed by the U.S., Japan, and the Netherlands in October 2022 triggered concerns about the potential misuse of imported equipment. The Semiconductor Industry Association urged stronger coordination among allies to maintain a level playing field in response to expanded U.S. curbs.

China’s Semiconductor Market:

In the global market, China emerged as the largest market for semiconductor production equipment, representing 29% of global sales in the April-June quarter, according to trade group SEMI.

The highlight was, Huawei’s release of a 5G smartphone featuring a homemade advanced 7-nanometer chip despite U.S. restrictions. Questions, however, lingered about the fabrication sources as Huawei faced limitations on using American equipment.

The current U.S. efforts to restrict chip exports to China, focusing on EDA tools and capital equipment, aim to curb China’s drive toward semiconductor self-sufficiency. While China boasts a large chip market demand and government support, it faces challenges in dependency on key inputs like EDA and capital equipment. As China aims to expand in mature nodes like 28 nm, it faces reluctance from Europe and Japan and limited acceptance in foreign markets. 

The surge in chip equipment imports by China raises significant global concerns and underscores the complex dynamics shaping the semiconductor industry.

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In the face of ongoing restrictions imposed by the United States and its allies on China’s access to advanced chips and technologies, the country has experienced a notable slump in its imports of integrated circuits (ICs). Newly released customs data reveals that China’s IC imports dropped by 18.5 percent in the first six months of 2023 compared to the same period the previous year, further exacerbating concerns about the nation’s semiconductor supply chain.

According to data published by the General Administration of Customs on Thursday, China’s imports of integrated circuits declined to 227.7 billion units during the first half of 2023, a significant decrease from the 279.6 billion units recorded in the corresponding period in the previous year. While this represents a slight improvement over the 19.6 percent drop observed in the first five months of 2023, it still highlights the challenges faced by China in meeting its demand for essential electronic components.

The customs data also revealed a considerable decline in the total value of chip imports, which fell by 22.4 percent to reach USD 162.6 billion during the first half of the year. This decline in value far exceeded the marginal 0.1 percent contraction in China’s overall imports for the same period, indicating the severity of the impact on the integrated circuit sector.

The sharp decline in China’s IC imports underscores the difficulties the country faces in securing the necessary components to support its rapidly growing technology industry. The ongoing restrictions imposed by the US and its allies have limited China’s access to advanced chips, which are critical for the development of cutting-edge technologies such as artificial intelligence, 5G telecommunications, and high-performance computing.

The data further emphasizes the urgent need for China to enhance its domestic semiconductor capabilities and reduce its reliance on foreign sources. The Chinese government has been taking proactive measures to strengthen its homegrown semiconductor industry through increased investment in research and development, as well as the establishment of semiconductor manufacturing facilities.

However, achieving self-sufficiency in chip production will take time, and until then, China may face continued challenges in meeting the demands of its technology sector. The decline in imports of integrated circuits serves as a stark reminder of the importance of a resilient and secure semiconductor supply chain for China’s economic development and technological advancement.

As the global landscape for semiconductor trade continues to evolve, it remains to be seen how China will navigate the complex web of restrictions and develop a sustainable strategy to address its chip supply concerns.

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