The United States has been implementing export curbs targeting China’s semiconductor industry since last year. However, according to a report by the US-China Economic and Security Review Commission (USCC), Chinese companies have managed to bypass some of these restrictions and continue to purchase US chip-making equipment.
The main aim of the export curbs introduced by the US in 2022 was to hinder China’s ability to develop advanced semiconductors used for artificial intelligence and military purposes. These restrictions resulted in approximately a 50% drop in US semiconductor exports to China, amounting to $6.4 billion. Despite this decline, China still managed to purchase around $3.1 billion worth of American chips and chip-making equipment in the first eight months of 2023.
The report highlighted how importers are exploiting gaps in the export controls by claiming that the equipment is being used on older production lines, allowing them to acquire advanced technologies that are banned for sale. Moreover, the limited capacity for end-use inspections makes it difficult to verify that the equipment is not being used to produce more advanced chips.
Furthermore, the export curbs have prompted China to increase its purchases of advanced chip-making tools from other countries such as Japan and the Netherlands. For example, China imported $3.2 billion worth of semiconductor manufacturing equipment from the Netherlands between January and August 2023, marking a 96.1% annual increase. The overall imports of semiconductor equipment by China during this period totaled $13.8 billion, with a 90% year-on-year increase in chip-related imports in the third quarter alone.
Despite the US export controls, China has managed to make technological advancements, as evidenced by the development of high-end 7-nanometer chips used in Huawei’s Mate 60 Pro smartphone. The report raised concerns about the efficacy of the current export control implementation and pointed out that the curbs were intended to ensure that the US maintained a technological lead over China.
China has criticized the US export curbs, arguing that they violate globally recognized market rules. The resistance from China to these export curbs underscores the ongoing economic tensions between the two nations.
In conclusion, the US export curbs aimed at slowing China’s advances in the semiconductor industry have faced challenges due to the exploitation of loopholes and the increased acquisition of technology from other countries. Moreover, China’s technological advancements continue, raising questions about the effectiveness of current export controls. These developments emphasize the complexities and competitive dynamics in the global semiconductor market and the broader economic rivalry between the US and China.