China breaks records of purchases of foreign chips in spite of US bans

Saturday, October 17, 2020, 14:03 GMT

China imported hundreds of billions of foreign chips in incomplete 2020, paying around $260 billion for them. After a two-year trade war with the United States, the nation still shows a heavy reliance on foreign chips, but intends to get rid of it almost entirely by 2025.

Need more chips

China has set many milestones at once for the importation of international chips. According to the main PRC customs administration, the Heavenly Kingdom imported 53.72 billion microcircuits by the end of September 2020, paying 256.93 billion yuan (38.17 billion dollars at the exchange rate as of 16 October 2020) for them.

According to the profile network publication cnTechPost, the PRC set its previous monthly record for importing imported microcircuits in July 2020, the country imported 46.9 billion chips during this month, spending about 207.65 billion yuan or about $30.85 billion on their purchase.

China acquired 387.18 billion microcircuits in the first three quarters of 2020 (from January to September inclusive), which is 23 percent higher than the number of sales in the same period of 2019. Expenditures have rose in terms of money, reflecting 16.6 percent rise-up to 1,767 trillion yuan, or around $262.5 billion at the current exchange rate.

Possible Annual Record

Often smashing records are the metrics for the first half of 2020: 242.27 billion chips were shipped to China for a total of $154.61 billion. And fiscal factors, respectively. Even the global coronavirus pandemic, which started with the COVID-19 leak in the Chinese city of Wuhan in December 2019, did not prevent supply growth.

Possible Annual Record

Often smashing records are the metrics for the first half of 2020: 242.27 billion chips were shipped to China for a total of $154.61 billion. And fiscal factors, respectively. Even the global coronavirus pandemic, which started with the COVID-19 leak in the Chinese city of Wuhan in December 2019, did not prevent supply growth.

China ‘s sales of international microcircuits are thus showing steady progress and could not only meet, but even surpass, the 2019 final indicators by the end of 2020. Wei Shaojun, the China Semiconductor Industry Association’s deputy chairman, made this assumption.

The world imported $308 billion worth of chips for the entire of 2019. It should be remembered that the world imported a greater amount of chips by the end of 2018, when China had not yet entered a trade war with the United States, paying $8 billion or 2 for them. 6% higher than in the year 2019.

Import volumes decline

The reliance of China on foreign chips is still very high, said Wei Shaojun. He stressed that this mainly affects high-performance (and thus costly) chips, although the possibilities of import replacement continue to increase in the low- and medium-price microcircuit segments. In these segments, the degree of dependency on foreign countries, Wei Shaojun said, is decreasing.

According to cnTechPost, the volume of domestic chips in China will soon reach 70%, leaving only 30% of the market for imported counterparts. For comparison, in 2019 everything was the other way around – 70% of chips in China were foreign and only 30% were domestic. However, this forecast is only for 2025, and it may change under the influence of various factors, both domestic and international.

According to Wei Shaojun, the main problem in China, because of which the country has to buy hundreds of billions of foreign chips, is that Chinese companies operating in this segment are not investing enough in research and development (R&D). He believes that even though a number of Chinese companies are currently investing in R&D more than 20% of their total investment, this amount is still too small. Wei Shaojun is confident that the Chinese integrated circuit industry is in dire need of capital and new technology.

Why is import replacement so important for China?

The importance of reducing China’s reliance on foreign chips as rapidly as possible and increasing its own production can be seen in Huawei’s example. In a trade war that started in May 2019 when US President Donald Trump (Donald Trump) barred Google from collaborating with her, China’s tehnogigant became for the US to pressure China’s control.

A number of other American companies, including Intel, Qualcomm, Xilinx and Broadcom, have also been hit by this ban, resulting in Huawei losing access to their processors. Subsequently, Trump began to mess with the work of Huawei on both the foreign and domestic Chinese markets, and the peak came in May 2020, when he robbed the corporation of the ability to negotiate with Taiwanese TSMC, the major producer of its processors. Trump practically barred her from producing Huawei goods, and in mid-September 2020, exports were stopped.

TSMC was also able to secure approval from the US authorities in mid-October 2020 to supply Huawei chips, but only those that will be issued to obsolete requirements of at least 28 nanometers. For Huawei, more advanced production methods would also be unavailable.

With a decision to become as separate as possible from overseas contractors, Huawei responded to all of this. Her own semiconductor output is going to be produced from scratch. But the tech giant will have to continue with the commissioning of its own chip manufacturing assembly line using outdated 45-nanometer technology. Over the coming year, Huawei wants to introduce it.