Air Freight News

US sanctions helped China supercharge its chipmaking industry

China’s chip industry is growing faster than anywhere else in the world, after US sanctions on local champions from Huawei Technologies Co. to Hikvision spurred appetite for home-grown components.

Nineteen of the world’s 20 fastest-growing chip industry firms over the past four quarters, on average, hail from the world’s No. 2 economy, according to data compiled by Bloomberg. That compared with just 8 at the same point last year. Those China-based suppliers of design software, processors and gear vital to chipmaking are expanding revenue at several times the likes of global leaders Taiwan Semiconductor Manufacturing Co. or ASML Holding NV.

That supercharged growth underscores how tensions between Washington and Beijing are transforming the global $550 billion semiconductor industry—a sector that plays an outsized role in everything from defense to the advent of future technologies like AI and autonomous cars. In 2020, the US began restricting sales of American technology to companies like Semiconductor Manufacturing International Corp. and Hangzhou Hikvision Digital Technology Co., successfully containing their growth—but also fueling a boom in Chinese chip-making and supply.

While shares in the likes of Cambricon Technologies Corp. have more than doubled from lows this year, analysts say there may still be room to grow. Beijing is expected to orchestrate billions of dollars of investment in the sector under ambitious programs such as its “Little Giants” blueprint to endorse and bankroll national tech champions, and encourage “buy China” tactics to sidestep US sanctions. The rise of indigenous names has caught the attention of some of the pickiest clients: Apple Inc. was said to consider Yangtze Memory Technologies Co. as its latest supplier of iPhone flash memory.

“The biggest underlying trend is China’s quest for self-sufficiency in the supply chain, catalyzed by Covid-related lockdowns,” Morningstar analyst Phelix Lee wrote in an email responding to inquiries from Bloomberg News. “Amid lockdowns, Chinese customers who mostly use imported semiconductors need to source homegrown alternatives to ensure smooth operations.”

At the heart of Beijing’s ambitions is the impetus to wean itself off a geopolitical rival and more than $430 billion worth of imported chipsets in 2021. Orders for chip-manufacturing equipment from overseas suppliers rose 58% last year as local plants expanded capacity, data provided by industry body Semi show.

That in turn is driving local business. Total sales from Chinese-based chipmakers and designers jumped 18% in 2021 to a record of more than 1 trillion yuan ($150 billion), according to the China Semiconductor Industry Association.

A persistent chip shortage that’s curtailing output at the world’s largest makers of cars and consumer electronics is also working in local chipmakers’ favor, helping Chinese suppliers more easily access the international market—sometimes with premiums tacked onto the best-selling products, such as auto and PC chips.

SMIC and Hua Hong Semiconductor Ltd., the biggest contract chip makers, have kept their Shanghai-based plants operating at almost full capacity even as the worst Covid-19 outbreak since 2020 paralyzes factories and logistics across China. With local authorities’ help, cargo flights from Japan delivered essential materials and gear to chip plants as the city went under lockdown. SMIC recently reported a 67% surge in quarterly sales, outpacing far larger rivals GlobalFoundries Inc. and TSMC.

Shanghai Fullhan Microelectronics Co.’s revenue grew 37% on average because of high demand for surveillance products. The video chip designer has pledged to expand into electric vehicles and AI after winning its “Little Giant” designation. And design tool developer Primarius Technologies Co. doubled sales on average over the past four quarters, saying it’s developed software that can be used in making 3-nanometer chips.

Putting aside long-term profitability concerns, Morningstar’s Lee said the aggressive capacity build-up from Chinese players will elevate their presence globally.

“There’s little doubt Chinese chipmakers can achieve revenue growth over the next few years from cars, consumer electronics and other devices,” he said.

Bloomberg
Bloomberg

{afn_job_title}

© Bloomberg
The author’s opinion are not necessarily the opinions of the American Journal of Transportation (AJOT).

Similar Stories

Gold rises as some G-7 nations to ban new imports from Russia

The US, UK, Japan and Canada plan to announce a ban on new gold imports from Russia during a summit of Group of Seven leaders that’s getting underway Sunday. Prices…

View Article
One of world’s major wheat buyers to trim imports as prices rise

Egypt plans to cut wheat imports by 500,000 tons per year, or about 10%, by eking out more subsidized bread from its grain, Supply Minister Aly El-Moselhy said.

View Article
Johnson says ‘reasonable’ to protect British steel with tariffs

Prime Minister Boris Johnson said that it’s reasonable for UK steel to enjoy the “same protections” other European steel economies have.

View Article
India to double capacity for washing coking coal to cut imports

India plans to ramp up its washing facilities for raw coking coal, a key input for the steel industry, in order to reduce its reliance on imports of the commodity. 

View Article
https://www.ajot.com/images/uploads/article/Biden_waving.jpg
US resuscitates bid at G-7 to counter China’s Belt and Road
View Article
Isolating China won’t help Hong Kong and Uyghurs, says Dutch leader

Dutch Prime Minister Mark Rutte said he opposes reconsidering trade relations with China over its policies toward Hong Kong and its Uyghur minority.

View Article