The Wall Street Journal (WSJ) reported on Nov. 4 (local time) that leading U.S. semiconductor equipment manufacturers, including Applied Materials and Lam Research, have instructed their suppliers to find alternatives to parts sourced from China. This directive comes with a stern warning that continued use of Chinese components or attracting Chinese investors could result in the termination of business relationships.
This move by the semiconductor giants signals a significant shift in the industry, as they not only plan to halt the supply of finished equipment to China but also aim to eliminate Chinese-made components from their manufacturing processes. This development is seen as a reflection of the U.S. government’s determination to eradicate China’s presence from the semiconductor supply chain, amid the ongoing growth of the Chinese semiconductor industry despite stringent export restrictions.
Applied Materials and Lam Research are among the world’s top four semiconductor equipment companies, alongside ASML from the Netherlands and Tokyo Electron from Japan. Notably, China represents the largest revenue source for both Applied Materials and Lam Research, making this decision particularly impactful. It is widely believed that the U.S. government is behind this “warning,” as part of its broader strategy to curb China’s technological advancements.
The U.S. has already imposed restrictions on the export of ultra-fine process semiconductors and semiconductor equipment to China. Now, the U.S. is taking it a step further by demanding the complete removal of China from the semiconductor equipment manufacturing process. The WSJ reported that the U.S. government is adopting an increasingly stringent stance on imports from China, with both major presidential candidates pledging a tough stance on trade with China. The semiconductor industry is considered crucial to national security, further driving these measures.
The tech industry is expressing concerns about the cost burden due to rising expenses from finding alternatives to Chinese products. It is challenging to find substitutes that are more cost-competitive than Chinese components, which could lead to increased prices for semiconductor equipment. Consequently, this would raise the prices of final semiconductors and IT devices produced. The WSJ noted that finding alternatives to Chinese suppliers is difficult and that the move to decouple from China risks angering Chinese policymakers, with the tech industry worried about potential cost increases.
