Tech war: China’s chip imports slump 27 per cent in the first 2 months of 2023 as US sanctions bite

Chip imports fell to 67.6 billion units in January and February, while the value of imports tanked 31 per cent to US$47.8 billion
China’s chip industry is facing mounting pressure amid escalating US restrictions, but other manufacturing activity is rebounding after the end of zero-Covid

Semiconductors

Ann Caoin Shanghai

Published: 8:30pm, 7 Mar 2023

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China’s chip imports slumped 27 per cent in the first two months of 2023 by volume, according to China’s customs data published on Tuesday.

China imported 67.6 billion integrated circuits (IC) in January and February, down 26.5 per cent from the same period last year, according to data released by the General Administration of Customs. The drop was steeper than the 15.3 per cent decline recorded for all of 2022, which was the country’s first annual fall in IC imports in two decades.

The total value of the imports also tumbled 30.5 per cent to US$47.8 billion, down from US$68.8 billion last year. Chip prices are down this year owing to a supply glut and a slowing global economy, a reversal from a year ago when prices were still rising as the market recovered from the 2021 chip shortage.

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China is also facing fewer options for imports as the US has escalated export restrictions on advanced chips – especially those with artificial intelligence applications such a Nvidia’s A100 graphics processing unit (GPU) – and the country has ramped up domestic production of semiconductors using mature process nodes.

In the first two months of 2022, China’s total volume of chip imports decreased by just 4.6 per cent year on year to 92 billion units, while the total value of imports increased 19.2 per cent. Chinese Customs typically combines trade data for January and February, when trade flows often slow due to the Lunar New Year holiday.

China’s IC exports fell 20.9 per cent year on year to 37.3 billion units in the two months, compared with a 0.5 per cent increase in a year ago. The total value of the exports dropped 25.8 per cent.

The latest figures reflect the mounting pressure on China’s semiconductor industry as the US seeks to curtail its geopolitical rival’s access to and ability to produce advanced chips and chip-making equipment.

Last October, the Bureau of Industry and Security, an agency under the US Department of Commerce, significantly escalated those restrictions with an update that also targeted China’s ability to develop and maintain supercomputers and manufacture advanced semiconductors used in military applications, including weapons of mass destruction.

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The US has also reportedly reached an agreement with Japan and the Netherlands in January to coordinate on export controls against China covering certain chip-making equipment, such as ArF Immersion deep ultraviolet lithography machines.

Semiconductor Manufacturing International Corp, China’s largest chip maker, warned in February that mass production at its new US$7.6 billion plant in Beijing could be postponed by one to two quarters owing to difficulties in obtaining equipment.

Meanwhile, other manufacturing activities rebounded in January and February after China relaxed its stringent zero-Covid policies in December, raising hopes for a fast recovery in trade data.

The official manufacturing purchasing managers’ index (PMI) beat expectations last month with a rise to 52.6, up from 50.1 in January and the highest reading since April 2012. The Caixin/S&P Global manufacturing PMI, a private-sector survey, rose to 51.6 last month, up from 49.2 in January.