The Chinese Are Importing Semiconductor Manufacturing Equipment In Record Numbers

Imports of semiconductor manufacturing equipment into China surged by more than 90 per cent in the last quarter, defying trade restrictions imposed by the US and its allies, as reported by Asia Nikkei.

According to Chinese customs data analysed by Nikkei, the imports of machinery and equipment for semiconductor production reached 63.4 billion yuan ($8.7 billion), marking a 93 per cent increase over the three months through September.

Notably, equipment for lithography, a crucial step in the semiconductor manufacturing process, saw a nearly fourfold increase. Imports of this equipment from the Netherlands, likely sourced from ASML, a leading chipmaking equipment supplier, grew over sixfold.

Lithography equipment is subject to trade controls, and after the US tightened export restrictions in October 2022, Japan and the Netherlands followed suit. Despite these controls, Chinese manufacturers appear to have accelerated orders, anticipating potential restrictions on access to equipment.

In the most recent quarter, China's share of ASML's sales surged to 46 per cent, a significant increase from the 14 per cent recorded in 2022.

During an earnings call, as per the report, ASML's chief financial officer Roger Dasse clarified that the shipments to China were primarily for "mid-critical and mature" production processes, distinct from the advanced semiconductors targeted by international sanctions.

Despite these assurances, concerns persist regarding the potential use of the equipment for manufacturing high-end semiconductors. China has adeptly navigated trade restrictions, leveraging them to enhance its manufacturing technology.

Notably, a new smartphone launched by Huawei Technologies in August showcased advanced 7-nanometer chips, possibly produced by Chinese foundry Semiconductor Manufacturing International Corp (SMIC), according to research firms.

A report from the US-based Center for Strategic and International Studies highlighted SMIC's technological advancements, raising the prospect that the company could mass-produce advanced semiconductors using equipment initially designed for older chip production lines. Dutch controls, however, apply only to specific lithography equipment used for cutting-edge chips.

The data on China's chipmaking equipment imports reveals a 40 per cent year-on-year increase from Japan, encompassing both lithography gear and etching equipment, a specialty of Tokyo Electron.

Meanwhile, imports from the US, which imposed the initial export restrictions, grew by approximately 20 per cent.

The US share of China's semiconductor manufacturing equipment imports declined from 17 per cent in 2021 to 9 per cent in the latest quarter, while the Dutch share surged from about 15 per cent to 30 per cent. Japan's share decreased from 32 per cent to 25 per cent.

Last month, the US expanded the scope of its export curbs. Responding to these rules, the Semiconductor Industry Association, an American industry group, called for strengthened coordination with allies to ensure a fair competitive environment for all companies.

China remains the largest market for semiconductor production equipment globally, comprising 29 per cent of global sales in the April-June quarter, according to trade group SEMI.