US export bans have wider implications than just China • The Register

The US fight to stem China’s growing semiconductor industry is having an impact, but it also risks damaging Western industries. Meanwhile, China is fighting back with new investments aimed at making its own industry more self-sufficient.

Washington’s sweeping export restrictions on semiconductor technology, announced in October, were reportedly aimed at preventing the most advanced cutting-edge technologies from falling into the hands of the Chinese military.

However, alongside US measures like the CHIPS act to boost its own semiconductor industry, this seems to reflect a broader concern that China could soon catch up with America and even overtake it in terms of technology.

But according to a Financial Times report, blocking access to Chinese technology will raise prices for businesses and consumers around the world at a time when many are already at risk of rising inflation pushing up prices .

A similar effect has already been seen in the telecoms industry, where countries like the UK have stopped using devices from China-based Huawei in the face of pressure from the US, a move that was thought to increase costs and delay upgrades too 5G networks as alternative sources had to be found.

The new US export restrictions already seem to be hitting China, as the country’s semiconductor imports fell 12.4 percent in September, we reported last month.

According to FT, China’s biggest problem is likely to be the equipment needed to manufacture advanced semiconductors using the latest state-of-the-art production nodes, typically those sub-14nm but especially the newer nodes such as 5nm and 3nm technology, who are now online. The manufacturers of most of these machines, including companies such as Lam Research and Applied Materials, are based in the US and are therefore not allowed to export kits to Chinese companies.

Other vendors, such as ASML from the Netherlands, are currently unaffected by US export controls, but Washington is already pushing to change that. As we reported earlier this month, it has been in talks with allies like Japan and the Netherlands to impose the same type of export restrictions.

On Friday, Dutch Trade Minister Liesje Schreinemacher told Reuters that the nation is in talks with the US on the matter. ASML was already barred from selling its most advanced photolithography equipment to China under an existing agreement, but the new US export restrictions go further.

Meanwhile, just last week, the US effectively banned the import or sale of Chinese telecom and video surveillance products from Huawei, ZTE, Hytera Communications, Hikvision and Dahua on national security grounds.

China is already taking steps to ramp up its own semiconductor industry to become more self-sufficient and less reliant on technology from other parts of the world, particularly the US.

The South China Morning Post reports that nine companies involved in the semiconductor supply chain have approved their initial public offering (IPO) applications, which will allow them to raise money from investors to expand their operations and research efforts.

These companies include several chip design outfits, a wafer foundry, and a chip packaging company. The SCMP quotes a senior Asia-Pacific economist as saying that China’s R&D efforts in the semiconductor industry “would be a complicated and lengthy process, but it is important to counter US restrictions.”

New figures from the research institute Gartner predict that the sales of the global semiconductor industry will already fall by 3.6 percent next year, almost wiping out the growth of 4 percent in 2022.

According to Gartner, total semiconductor sales are now expected to reach $596 billion in 2023, up from a previous forecast of $623 billion. This is largely due to the rapid deterioration in the global economy and weaker consumer demand, said Practice Vice President Richard Gordon.

The market for memory chips will be particularly badly affected, which according to Gartner will stagnate for the rest of 2022 but is forecast to decline in sales by 16.2 percent in 2023. ® US export bans have wider implications than just China • The Register

Rick Schindler

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