China's semiconductor industry is exhibiting significant growth amid escalating trade tensions with the United States, as enterprises rapidly increase their stockpiling of integrated circuits (ICs). This trend is driven by concerns over impending US trade sanctions. From January to November 2023, China's imports of ICs reached a staggering 501.47 billion units, representing a 14.8 per cent increase in volume compared to the same timeframe in 2022. The value of these imports has also surged, climbing to US$349 billion, which marks a 10.5 per cent year-on-year rise, as reported by the General Administration of Customs.
The surge in imports correlates with the introduction of new measures by the US Commerce Department's Bureau of Industry and Security. These sanctions, revealed earlier this month, impose export restrictions on 24 types of chipmaking equipment and three software categories critical for semiconductor development. The updated restrictions particularly target high-bandwidth memory (HBM) chips, widely used in data centres for artificial intelligence (AI) projects. The intention behind these limitations is to restrict China's advancements in AI technologies, especially those potentially applicable to military use.
In tandem with import increases, China's exports of semiconductors have also seen substantial growth. The export of ICs during the January-November period reached 271.6 billion units, reflecting an 11.4 per cent increase from last year. The total export value nearly hit US$145 billion, displaying an 18.8 per cent rise year-on-year. Notably, China's IC output for October 2023 rose by 11.8 per cent, culminating in a total production of 35.9 billion units, while production in the first ten months of the year increased by 24.8 percent from the equivalent period in 2022.
The geopolitical landscape surrounding this industry is further complicated by recent actions taken by China's regulatory bodies. In response to the US's tightened sanctions, the China antitrust regulator has initiated an investigation into American semiconductor company Nvidia. This investigation concerns Nvidia's US$6.9 billion acquisition of Israeli networking firm Mellanox Technologies, a deal that was previously approved by China in 2020.
Moreover, in light of the recent restrictions, various state-backed organisations encompassing sectors such as internet services, automotive, and communications have urged their members to avoid using chips manufactured by US suppliers. The China Semiconductor Industry Association has expressed concerns regarding the safety and reliability of US-origin chips, stating that they are "no longer safe, no longer reliable."
The shifting dynamics in the global semiconductor market underscore the ongoing tensions between the US and China, particularly as both nations attempt to secure their technological futures in critical industries such as artificial intelligence and semiconductor production. As China continues to bolster its domestic semiconductor capabilities and navigate international trade challenges, the implications for global business practices remain significant.
Source: Noah Wire Services