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China’s semiconductor equipment imports have reached record levels in anticipation of export curbs by US allies.
According to Chinese customs data, imports of chip production tools in June and July totaled nearly $5 billion, a 70% increase from the same period last year when the total was $2.9 billion.
The majority of these imports came from the Netherlands and Japan, two countries that have imposed restrictions on chipmaking equipment exports as part of their collaboration with the US to hinder China’s technological advancement.
These export limitations mean that buyers of certain tools will need to obtain licenses from the Dutch and Japanese governments, causing concern among Chinese chipmakers. Japan’s restrictions came into effect on July 23, while the Dutch restrictions will be implemented on September 1.
Although it is unclear how much of the increased imports relate to the restricted tools, the purchases indicate China’s desire to avoid any disruptions to its plans for expanding chip production.
Chinese companies are using the imported equipment to ramp up the production of older, less advanced chips that are not subject to Western restrictions.
“China’s increase in semiconductor equipment inventory is a response to the export restrictions imposed by the Netherlands and Japan,” explained Lucy Chen, the vice-president of Isaiah Research, a Taiwan-based research firm. “Through this advance stockpiling, China aims to mitigate potential supply chain bottlenecks.”
Semiconductor Manufacturing International and Yangtze Memory Technologies, among other Chinese groups, rely on equipment from the US, the Netherlands, and Japan for chip production.
The tools mentioned in the customs data refer to equipment such as lithography and etching machines for chip production, excluding components and materials like wafers.
Insiders in the industry have stated that Chinese imports of Dutch chipmaking equipment doubled in June and July compared to May, primarily due to increased deliveries of lithography machines to Chinese clients from ASML, one of the leading chipmaking equipment producers.
Peter Wennink, the CEO of ASML, acknowledged the strong demand for tools used in the production of mature or less cutting-edge chips by Chinese customers. However, ASML declined to comment further.
Recent importation of machines has been directed towards small foundries supported by local governments in China, as Beijing aims to strengthen its chipmaking capabilities, according to government officials familiar with the situation.
China’s imports of chip equipment from other countries, including Singapore and Taiwan, have also contributed to the record-breaking levels of imports.
Experts have noted that this surge demonstrates China’s determination to continue expanding the production of less advanced chips despite the challenges posed by tightened export controls. Counterpoint, a technology market research group, reported a 30% increase in shipments from the top five chipmaking equipment sellers to China during the second quarter of this year.
Ashwath Rao, a senior research analyst at Counterpoint, stated, “China’s focused investment in strategic fabrication plants ensures local supply and sustained commitments to mature technologies, acting as a buffer against geopolitical uncertainties.”
Rao further added that China is producing chips for use in electric vehicles, the green energy transition, and industrial applications, which only require older chips not subject to export controls.
Additional reporting by Tim Bradshaw in London
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