China’s chip imports decline 15% in first nine months of 2023 as the country braces for a new round of US tech export controls

The number of chips that China imported from January to September reached 355.9 billion units, down from 416.7 billion in the same period in 2022
The total value of semiconductors imported by China in the past three quarters fell 19.8 per cent year on year to US$252.9 billion

Semiconductors

Ann Caoin Shanghai

Published: 9:30pm, 13 Oct 2023

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China’s semiconductor imports declined 14.6 per cent year on year in the first nine months of 2023, as the country braces for a new round of US tech export controls that the Biden administration will reportedly impose.

The number of integrated circuits (ICs) that China imported from January to September reached 355.9 billion units, down from 416.7 billion in the same period last year, according to data published by the General Administration of Customs on Friday.

The total value of IC imports in the past three quarters fell 19.8 per cent year on year to US$252.9 billion, which marked an improvement from the 26.7 per cent drop in value in the first three months of the year. By comparison, the value of China’s overall imports saw a 7.5 per cent decrease in the same nine-month period.

In the first three quarters of 2022 when there was tightness in the global semiconductor supply chain, China’s IC imports dropped 12.8 per cent in volume, but saw a 1.5 per cent increase in value.

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This year’s IC import trend for China shows a modest improvement over the past several months. The volume of chips imported in the first eight months of the year saw a 15.1 per cent decline, compared with a 16.8 per cent drop in the first seven months and 18.5 per cent decrease in the first six months.

That reflects the quandary many Chinese tech firms find themselves in, as they continue to pursue development projects amid stifling export restrictions imposed by Washington and its allies.

For example, China’s massive demand for advanced semiconductors to power new artificial intelligence (AI) development projects has created a fast-growing market for smuggled graphics processing units (GPUs), such as the A100 and H100 devices from Nvidia Corp, according to a June report by the South China Morning Post.

That under-the-counter trade has apparently prospered, despite a US government ban imposed in August last year on the export to China of certain products from chip suppliers Advanced Micro Devices and Nvidia, which has a near monopoly on GPUs used to train AI systems.

US eyes more AI chip curbs on Chinese companies to close loophole

The Biden administration is now considering closing a loophole that gives Chinese companies access to American AI chips through units located overseas, according to a report on Friday by Reuters, which cited four people familiar with the matter.

The efforts to tighten semiconductor export restrictions show how Washington has been struggling to cut China off from top AI technology and how difficult it is to plug every gap in trade controls, the report said.

This month marks a year since the US Commerce Department initiated export controls on advanced ICs and chip manufacturing equipment to China.

Meanwhile, China’s total imports from US allies South Korea, Japan and Taiwan – economies that are major players in the global semiconductor supply chain – continued to fall in the first nine months of this year.

Customs data showed that China’s total imports from South Korea plunged 23 per cent in the first three quarters, marking the steepest drop among the country’s major trade partners. Imports from Japan and Taiwan slumped 16.3 per cent and 20 per cent, respectively.

While smartphone manufacturing activity in China continued to decline in the first eight months of the year, analysts expect the release of new 5G handsets by Huawei Technologies in spite of US sanctions will help reinvigorate the industry’s biggest market.