China stocking up on chips & high-tech equipment to negate US sanctions

China is increasing imports of computer chips and equipment required to manufacture them in a bid to mitigate the impact of a US ban on high-tech exports, as Beijing’s semiconductor industry struggles to meet domestic demand.

The Trump administration cracked down on China’s tech giants last year, trying to cut their access to advanced chips. One of the measures, which came into effect in September, required foreign manufacturers that use American chipmaking equipment to get permission before selling semiconductors to Huawei, while dozens of other Chinese firms faced export restrictions.

This forced tech majors to start stockpiling supplies before the ban took effect. Purchases of chip-making machines by Chinese firms amounted to $32 billion in 2020 and were up 20 percent year-on-year, according to a Bloomberg analysis of official trade data. The increased purchases made China the largest market for such equipment last year, according to SEMI, an industry association which represents semiconductor equipment makers and device manufacturers worldwide.

At the same time, imports of computer chips jumped by nearly 15 percent in 2020, compared to a year earlier, and rose to $350 billion, according to Chinese media citing customs data. However, it is understood that the bulk of those imports were subsequently reexported, as China’s outbound shipments of electronics jumped last year.

Technological self-sufficiency has been one of the main goals for the Chinese government in recent years, and the issue has become even more vital amid the trade conflict with the US. According to the “Made in China 2025” national industrial plan, the country was supposed to produce 40 percent of the semiconductors it needs by 2020 and further increase the share to 70 percent by 2025. However, China’s chip purchases exceeded $300 billion for the third consecutive year in 2020, and some analysts noted that the country fell short of its self-sufficiency goal.

Washington has been increasing pressure on Chinese companies, including tech and telecom majors, which the US accuses of posing a national security threat. The Trump administration added dozens of companies to the Entity List, which forbids American businesses from dealing with blacklisted firms and transferring technology to them without a special government license. Another ban hampers investment in Chinese companies that the US alleges have ties to the Chinese military.

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