How Is China Preparing For Chip Export Controls Imposed By The US

China's imports of semiconductor equipment have surged to record levels in anticipation of impending export restrictions by US allies.

According to Chinese customs data, reported by the Financial Times, the value of chip production tool imports in June and July reached nearly $5 billion, marking a 70 per cent increase from the $2.9 billion recorded in the same period the previous year.

The majority of these imports originated from the Netherlands and Japan, both of which have implemented export limitations on chipmaking equipment in collaboration with the US to impede China's technological progress.

These restrictions will mandate purchasers of specific tools to acquire licenses from the Dutch and Japanese governments, prompting concerns among Chinese chip manufacturers.

While it remains uncertain how much of the increased imports pertain to equipment subject to these restrictions, the acquisitions reflect China's desire to avert any disruptions to its ambitions of expanding chip production.

China aims to bolster the production of less advanced chips, which are not subject to Western restrictions, using the imported equipment. This strategic move is seen as a response to export restrictions imposed by the Netherlands and Japan.

Prominent Chinese firms like Semiconductor Manufacturing International and Yangtze Memory Technologies heavily rely on equipment from the US, the Netherlands, and Japan for chip manufacturing. The category of "tools" in the customs data encompasses equipment such as lithography and etching machines used in chip production but excludes components and materials like wafers.

The report states that Chinese imports of Dutch chipmaking equipment doubled in June and July compared to May, largely due to increased deliveries of lithography machines from ASML, a major chipmaking equipment producer. ASML's CEO, Peter Wennink, noted strong demand from Chinese customers for tools to manufacture mature or less cutting-edge chips. Chinese purchases of etching equipment and wafer-coating machines from Japanese companies have also risen since the US began tightening export controls on chip equipment in 2020.

Recent imports of machinery have also been directed to newly established small foundries supported by local Chinese governments, aligning with Beijing's efforts to expand domestic chipmaking capabilities. China's chip equipment acquisitions from other countries, including Singapore and Taiwan, have further contributed to a surge in imports from these nations.

This surge in imports underscores China's endeavor to sustain the production of less advanced chips despite the challenges posed by tightened export controls.