Business Maverick

Business Maverick

China buys fewer chip-making machines as US restrictions start

China buys fewer chip-making machines as US restrictions start
A SK Telecom Co. Sapeon X220 AI semiconductor board is arranged for a photograph at the company's office in Seongnam, South Korea, on Wednesday, Nov. 25, 2020. The Sapeon X220 is designed to speed up servers that cater to a growing number of mobile devices - from drones to self-driving vehicles - that perform better with AI. Photographer: SeongJoon Cho/Bloomberg

Purchases of the machines to make computer chips fell 27% last month from a year earlier as the US imposed new, sweeping sanctions to try and derail China’s chip ambitions.

Chinese firms imported $2.4-billion worth of machinery used in semiconductor manufacturing last month, the lowest amount in more than two years after Washington broadened restrictions on the sale of the gear to the world’s No 2 economy. 

It’s unclear exactly how much imports were impacted by the sanctions, which were announced early in the month, but October was significantly weaker by value than any other month this year. Chinese purchases from overseas suppliers have fallen in seven of the 10 months for which data has been reported so far in 2022.

Purchases from major exporters such as Japan and the US were down in October, according to Bloomberg analysis of official trade data released on Monday. Shipments from the Netherlands doubled in the month. That is where ASML Holding NV, the leading producer of chip-making equipment, is headquartered.

In the past few years, Chinese firms have been rapidly buying more of this equipment as the country seeks to develop its domestic semiconductor industry to be independent of the US. 

The new US restrictions only apply to US firms at the moment, and while President Joe Biden’s administration is negotiating with Japan and the Netherlands to try to convince them to limit what can be sold to Chinese firms, Washington doesn’t expect they will agree soon. 

The trade data also showed that Chinese imports of computer chips were up 1% in the first 10 months of the year, although much of that increase came at the start of 2022. More recent declines have reflected a cratering in demand for smartphones and PCs after fears of a global recession deepened. 

China’s Covid Zero restrictions – some of the harshest in the world – have also disrupted production and are now disrupting the making of iPhones and other devices. China is the world’s largest importer of semiconductors, with many of them being assembled into electronics or other goods which are then re-exported.

Despite the curbs, shipments to China of the US equipment to make chips is unlikely to fall to zero. The controls may stop US exports of the most high-tech machinery, but companies are still allowed to sell equipment used to make older, less advanced chips. The US has also granted 1-year exemptions for some foreign manufacturers with fabrication plants, or fabs, in China.

It may also be hard for China to try and ramp up purchases of these goods from non-US suppliers anytime soon. Tokyo Electron Ltd said recently it’s operating at near-full capacity, with months-long wait times for equipment delivery. BM/DM


Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

A South African Hero: You

There’s a 99.8% chance that this isn’t for you. Only 0.2% of our readers have responded to this call for action.

Those 0.2% of our readers are our hidden heroes, who are fuelling our work and impacting the lives of every South African in doing so. They’re the people who contribute to keep Daily Maverick free for all, including you.

The equation is quite simple: the more members we have, the more reporting and investigations we can do, and the greater the impact on the country.

Be part of that 0.2%. Be a Maverick. Be a Maverick Insider.

Support Daily Maverick→
Payment options