In October 2022, the U.S. introduced export restrictions on semiconductor equipment to China, a move that has significantly impacted the global semiconductor industry. Despite these restrictions, China’s semiconductor equipment purchases have surged, reaching $36.6 billion in 2023, up from $28 billion in 2022. This dramatic increase highlights China’s strategic efforts to achieve semiconductor self-sufficiency and mitigate the risks posed by Western regulations.

According to a report by CNBC on September 4 (local time), data from the International Semiconductor Equipment and Materials Association (SEMI) revealed that China’s expenditure on semiconductor equipment procurement in the first half of this year amounted to $24.73 billion (approximately 33 trillion won). This figure surpasses the combined total of $23.68 billion spent by South Korea, Taiwan, North America, and Japan during the same period. In the second quarter alone, semiconductor equipment sales to China reached $12.2 billion.

The surge in China’s semiconductor equipment purchases can be attributed to several factors. Alex Capri, a senior lecturer at the National University of Singapore, commented, “China appears to be stockpiling semiconductor manufacturing equipment as a preemptive measure against the risk of additional export restrictions by the U.S. ahead of the presidential election.” This stockpiling strategy is part of China’s broader goal to achieve technological self-sufficiency and reduce reliance on foreign technology, as outlined in its “Made in China 2025” initiative.

Despite the extensive regulations, China remains a major revenue source for the world’s leading semiconductor equipment manufacturers. The Netherlands’ ASML, for instance, saw its revenue share from China jump from 17% in the fourth quarter of 2022 to 49% in the second quarter of this year. Similarly, Tokyo Electron and Screen Holdings generated over 40% of their total revenue from China in the last quarter.

Clark Tseng, a senior director at SEMI, noted, “Efforts to secure supplies are expected to continue in the second half of this year, but a slowdown is anticipated next year.” He also warned, “Excessive investment could lead to inefficiencies and eventually exert price pressure on non-Chinese companies.”

China’s focus on semiconductor self-sufficiency is driven by the need to avoid the risk of restricted access to key technologies due to Western regulations. CNBC explained that China is making large-scale investments to achieve this goal. However, Alex Capri pointed out that “due to U.S. export controls, China is blocked from acquiring advanced manufacturing technologies.” He added, “While they are striving to build the technology independently, it will be nearly impossible.”

The global semiconductor industry plays a crucial role in modern technology, with applications in consumer electronics, automotive, telecommunications, and military sectors. Understanding the dynamics of this industry, including the impact of U.S.-China trade relations and the strategic goals of China’s technological ambitions, is essential for grasping the significance of these developments.

As China continues to invest heavily in semiconductor equipment, the industry may face challenges related to overproduction. CNBC reported that older chips could soon face an overproduction situation, similar to industries like electric vehicles and solar panels. This could have economic implications, including potential price pressures and market inefficiencies.

In conclusion, China’s substantial semiconductor equipment purchases underscore its determination to achieve technological self-sufficiency amid ongoing trade tensions with the U.S. While the immediate future may see continued efforts to secure supplies, the industry must brace for potential slowdowns and market adjustments in the coming years.