China Chip Imports Sink As US Controls Bite

Matthew Broersma,
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ASML's TWINSCAN NXE:3400B semiconductor lithography tool. ASML chip

China’s imports of semiconductors declined for the first ten months of the year as new US export restrictions take effect

Semiconductor imports in China declined more than 13 percent in the year through October as the effects of dramatic US chip export controls and a slowing global economy made themselves felt.

China imported 458 billion integrated circuits through the end of October, a 13.2 percent decline from the same period a year earlier, according to figures released by the country’s General Administration of Customs on Monday.

For the first nine months chip imports were down 12.8 percent year-on-year. The figures for October alone showed a year-on-year decline of 13.7 percent.

tsmc china chip semiconductorChip restrictions

Chip imports began to decline in January and February, but accelerated in October following a raft of export controls announced by the US on 7 October that block chip manufacturers from sending high-end chips to Chinese firms.

The restrictions affect companies outside the US, such as Taiwan Semiconductor Manufacturing Co. (TSMC), because virtually all of them use US-made technology.

In the wake of the sanctions China’s Alibaba and chip design start-up Biren both downgraded the performance of chips they were planning to order from TSMC in the hope that the changes would allow the chips to comply with the new rules, the Financial Times reported on Sunday.

China’s chip exports also declined amidst a worldwide slowdown in demand for electronics products of all kinds, spurred by inflation, interest rate hikes and other factors.

Export decline

The country’s exports fell 10.8 percent to 230.4 billion units for the first 10 months of the year, down from 258.2 billion for the same period a year earlier.

Worldwide chip sales contracted in September for the first time since early 2020, declining 3 percent from the same month a year earlier, according to the Washington-based Semiconductor Industry Association, indicating the worldwide chip shortage is quickly turning into a glut.

Industry analysts reported shrinking demand for consumer electronics, smartphones and computers, which had earlier skyrocketed during the lockdowns of 2020, while contract chip makers such as TSMC have seen their biggest customers cancel orders.

Global 5G smartphone shipments are projected to shrink by as much as 150 million units in 2022, with demand for 5G chips to fall by an estimated 100 million to 120 million units, according to Strategy Analytics.

Electronics slowdown

Meanwhile, Gartner estimated that wordwide PC shipments totalled 72 million units in the second quarter of 2022, down nearly 13 percent year on year, the biggest decline in nine years.

Demand for chips in smartphones and personal computers accounts for more than half of worldwide chip foundry capacity.