The last sixteen months have been tough for the Chinese semiconductor industry. The death throes of the COVID-19 pandemic first and the sanctions imposed by the alliance led by the United States later have caused the manufacture of chips in this gigantic Asian country has fallen noticeably. The final stretch of 2021 was not bad, and in January 2022 production grew, but from then on the outlook changed drastically.
China currently has the largest semiconductor market on the planet. To respond to your domestic demand, you only have two options: manufacture more or import more. The problem is that the sanctions to which it is subjected intensified at the end of 2022 and represent a barrier on both fronts. On the one hand, they deny Chinese chipmakers access to the most advanced lithography equipment produced by ASML, Tokyo Electron and other foreign companies.
In addition, the sanctions also make it difficult for them to obtain the chemicals that are involved in the manufacturing processes of integrated circuits (many of them come from Germany). And, to top things off, it restricts the range of cutting-edge chips that China has access to through official import channels. In fact, according to the Chinese Administration, the importation of integrated circuits from Taiwan and South Korea has fallen 21% during the first four months of 2023 if we compare it with the same period last year.
April has marked a turning point that favors the Chinese market
For the first time since January 2022, the production of integrated circuits in China has grown. According to its own National Statistics Office, it has done so by 3.8% if we compare it with the same period in 2022, which has allowed it to reach a manufacturing figure of 28,100 million units. That percentage is relatively modest, but what is really important is not the number itself; Most importantly, a turnaround seems to be brewing that could give the Chinese chip market a breath of hope.
Chinese companies have increased production of the chips required by car manufacturers and consumer electronics brands
In any case, the very delicate current situation invites us to ask ourselves how it is possible that China is suddenly manufacturing more chips If the sanctions run their course and access to advanced lithography equipment is more difficult than ever. The answer is simple: Chinese companies have ramped up production of the integrated circuits required by car manufacturers and consumer electronics brands. Cutting-edge equipment is not required to produce these semiconductors, which has allowed chipmakers to get around sanctions and bet on them.
To put everything we have just seen in context, we are interested in noticing that during 2022 China manufactured 324.2 billion integrated circuits, a figure that represents a drop of 9.8% compared to 2021. Curiously, the biggest drop came in October 2022, the same month in which the US government clenched its fist to the maximum and expanded the scope of the sanctions.
China aspires to gradually become independent from foreign technologies, and to achieve this it will have to travel a long road that will be tortuous at times. Making more “simple” chips not a definitive solutionbut at least it provides a breath of air to a sector that has just gone through an extraordinarily stressful phase.
Cover image: Xataka with Midjourney
More information: SCMP
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