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China’s imports of semiconductor equipment had soared to record highs before U.S. allies imposed export curbs.
Chinese customs data showed that China’s imports of chip production tools totaled nearly $5 billion in June and July, up 70 percent from $2.9 billion in the same period last year.
Most of the imports come from the Netherlands and Japan, which have imposed export restrictions on chipmaking equipment as they work with the United States to slow China’s technological progress.
The restrictions mean buyers of certain tools must apply for licenses from the Dutch and Japanese governments, raising concerns among Chinese chipmakers. Japan imposed restrictions on July 23, while those in the Netherlands will take effect on September 1.
While it’s unclear how much of the increase in imports is related to the tools that will be restricted, the purchases signal China’s desire to avoid any disruption to its plans to expand chip production.
Chinese companies are trying to use imported equipment to boost production of less sophisticated chips that are not restricted by the West.
“This is one of China’s responses to this issue . . . export restrictions from the Netherlands and Japan,” said Lucy Chen, vice president at Taiwanese research firm Isaiah Research. “China has increased semiconductor equipment inventories by stocking up in advance to ease potential supply chain bottlenecks.”
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Chinese companies such as SMIC and YMTC rely on equipment in the United States, the Netherlands and Japan to make chips.
The tool category in the customs data includes equipment such as lithography machines and etching machines used in chip production, but excludes parts and materials such as wafers.
Industry insiders familiar with China’s equipment purchases said China’s imports of Dutch chip-making equipment doubled in June and July from May as ASML delivered more lithography machines to Chinese customers. ASML is one of the largest producers of chip manufacturing equipment.
ASML Chief Executive Peter Wennink said on an earnings call last month that there was strong demand from Chinese customers for tools to make mature or less sophisticated chips. ASML declined to comment further.
Imports from Japan also rose. After the United States began to tighten export controls on chip equipment in 2020, some Chinese companies began to purchase etching equipment and wafer coating machines from Japanese companies.
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Two government officials familiar with the situation said some of the machines imported in recent months have been shipped to small, recently established foundries backed by China’s local governments, as Beijing works to expand its chipmaking capabilities.
China’s purchases of chip equipment from other places such as Singapore and Taiwan also drove record imports from those countries.
The surge underscores China’s attempt to continue expanding production of less advanced chips, experts said, despite challenges from tightening export controls.
Shipments to China by the top five sellers of chipmaking equipment rose 30 percent in the second quarter of this year, according to technology market researcher Counterpoint.
“China’s concentrated investment in strategic (manufacturing plants) can help secure local supply, while continued commitment to mature technology can act as a buffer against geopolitical uncertainty,” said Ashwath Rao, senior research analyst at Counterpoint.
Rao said China is producing chips for electric vehicles, green energy transitions and industrial applications that only require old chips that are not subject to export controls.
Additional reporting by Tim Bradshaw in London
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