The U.S. latest export curbs imposed last month have dealt a significant blow to China’s semiconductor industry. The pressure of falling orders weakened revenue, and insufficient investment made the entire sector despair.
According to a South China Morning Post on November 12, among Chinese chip company executives who participated in the Semicon China summit this month, 80% believe that the industry would likely face a more challenging year in 2023, and they are also “preparing for winter” in the time ahead.
Liu Erzhuang, CEO of Productive Technologies, said, “Next year will be relatively sluggish, whether from the global or domestic perspective, so we have to improve our product.”
Zhang Guoming, president of Shanghai-listed chip equipment maker Hwatsing Technology, revealed that Chinese chip companies have forecast and prepared for a potential downturn next year as the global semiconductor industry has turned from shortage into oversupply.
SCMP noted that China’s semiconductor market already went into recession in early March and has worsened since the Biden administration published new export restrictions in October.
The latest curb aims to hinder the Chinese Communist Party’s (CCP’s) ability to purchase and use U.S. technology for manufacturing high-end chips for military development, artificial intelligence, and supercomputers.
Under the new regulation, firms must obtain licenses from the U.S. Department of Commerce before supplying China-based chipmakers with cutting-edge U.S. manufacturing equipment.
Nikkei Asia pointed out that the export curbs this time also pose the greatest threat to China’s chip sector. It’s because the curbs are much more restricting than not having access to U.S. cutting-edge technology.
The outlet, citing sources, reported on October 11 that for the first time, new U.S. regulations do not allow “U.S. persons,” including both citizens and permanent residents, to assist in the “development” or “production” of specific advanced chips in China-based chipmaking facilities.
As a result, all Chinese Americans with U.S. citizenship will be subject to the provisions.
Zhang commented, “[The latest export controls] may make it difficult for us to invest in advanced manufacturing process nodes in the future. In preparation for the winter, we have to do more research and development.”
SCMP claimed that the U.S. trade sanctions hampered multiple segments in China’s semiconductor industry, from chip equipment makers and chip design companies to wafer fabs.
Sun Bin, executive vice president of ChangXin Memory Technologies (CXMT), said in a keynote speech at the Shanghai-based summit, “The inevitable political factors and the pandemic this year have caused some short-term fluctuations. We need to live through the stage of supply and demand imbalance.”
CXMT and Yangtze Memory Technologies are two of China’s major memory chipmakers. However, both are significantly impacted by the latest U.S. policy, which limits China’s access to the technology of DRAM chips of 18nm and below, and NAND chips with 128 layers or more.
Therefore, chip design company Biren Technology has lowered its chip’s performance to skirt the restrictions.
Xing Xiao, a partner, and CEO at Shanghai Haiwang Fund Management, thinks that Chinese wafer fabs will likely experience a decline in production capacity as the export curbs have hindered the rate of development and new chip factory construction.
Xing added that one invested equipment firm has witnessed orders tumble by 20%.
According to a panel discussion at Semicon China, chip venture capital firms in China, which have invested tens of billions of dollars in the last few years, are also not immune to the restrictions.
Sun Yuwang, president of China Fortune-Tech Capital, a venture capital company incorporated by SMIC in 2014, said the number of investment projects approved by the firm each week is nearly 50% less than four months ago.
Sun added the firm intended to cut investment as it prepares for a slowdown in the chip sector, along with increasing new investment standards and being “especially cautious” with high-value projects.
Regarding China’s chip industry, SCMP, citing data from the business database platform Qichacha, reported that 3,470 Chinese chip-related firms deregistered in the January-to-August period, increasing from 3,420 firms a year earlier.