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Jan 22, 2024, 6:46pm EST
techEast Asia
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Semafor Signals

China races to buy chip-making equipment as US cracks down on exports

Insights from Bloomberg, The New York Times, Investing.com and ChinaAI

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REUTERS/Aly Song
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The News

Chinese firms ramped up investment in chipmaking technology last year in an attempt to beat U.S.-led export controls, with imports of the machinery rising 14% in 2023 to almost $40 billion, China’s General Administration of Customs reported.

In October, the Biden administration announced additional curbs on American firms’ sales of advanced chips and chip-making machines to limit China’s progress in military and artificial intelligence, building on previous controls introduced in 2022.

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SIGNALS

Semafor Signals: Global insights on today's biggest stories.

China slams Washington’s ‘technological blockade’ as it rushes to buy chip-making equipment

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Sources:  
Bloomberg, The Wall Street Journal

China rushed to buy up chip-making equipment ahead of the export controls imposed by the U.S, Japan, and the Netherlands in recent months, as Washington and its allies crack down on exports of the technology Beijing needs to further its own semiconductor industry.

Imports by firms such as China’s Semiconductor Manufacturing International Corp. soared at the end of 2023, Bloomberg reported, with purchases of some equipment rising by as much as 1,000%.

The Netherlands late last year blocked Dutch firm ASML from exporting lithography machines – which are key to chipmaking – to China, after coming under pressure from U.S. officials, Bloomberg reported.

China’s Ministry of Foreign Affairs responded by accusing the U.S. of “bullying”, saying Washington was coercing other nations into “imposing a technological blockade against China” that would seriously damage the global semiconductor industry.

Export curbs could also hurt US semiconductor industry

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Sources:  
The New York Times, Investing.com

Washington has imposed widespread limits on the export of chip-making equipment to China since 2022, fearing it could assist the Chinese military in guiding hypersonic missiles, developing surveillance systems, and cracking secret U.S. codes, The New York Times reported.

But these limits could also hurt U.S. chip-makers, which together generate $50 billion in revenue from China annually, according to Investing.com – with companies including Nvidia lobbying against the controls. The export restrictions have also brought up concerns about job cuts and fewer investments in U.S. semiconductor factories, but U.S. officials have moved to offer reassurances that chips used purely for commercial purposes, such as smartphones, digital cameras and televisions, are exempt from the restrictions.

China still has a long way to go to reach semiconductor independence

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Sources:  
Jeffrey Ding from ChinaAI, The Guardian, South China Morning Post

Experts agree that China is still a long way off its goal of being 70% self-sufficient in chips by 2025. However, it has narrowed the gap in its trade deficit for semiconductors over the past two years, according to ChinaAI, while one Chinese company recently made what appeared to be a significant technological breakthrough, presenting research on advanced transistors used in cutting-edge memory chips, The South China Morning Post reported. ChangXin Memory Technologies has sparked interest among analysts who say such chips typically involve equipment now subject to U.S. export controls, with one calling the progress “impressive”, saying it shows that China is “not far away from state-of-the-art research and products”.

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