China has imported a near-record-breaking $40 billion worth of semiconductor equipment and machinery in 2023, a 14% increase from 2022, according to Bloomberg. Despite an overall decrease in imports, the sharp increase in these imports signals how aggressively China is pursuing its goal to achieve chip self-sufficiency and how it still needs to rely on the West to get there.
Partial and early data in 2023 suggested China spent an incredible amount of money importing semiconductor tools. These imports were worth $5 billion in June and July alone, up 70% compared to June and July in 2022. The U.S. has imposed sanctions in an attempt to stop China from importing particularly cutting-edge tools, but Chinese foundries have found ways to buy equipment that they normally wouldn't be allowed to.
Imports from the Netherlands, in particular, increased, and in December, they increased by nearly 1,000% compared to last year. This is certainly because the Netherlands is home to some of the most important producers of semiconductor equipment, such as ASML. Although the Netherlands had imposed restrictions on Chinese companies last year, they only started to come into effect on September 1. While ASML's high-end EUV lithography machines were included in the September 1 ban, lower-end DUV lithography tools weren't banned until January 1.
These figures are especially remarkable, considering the Chinese economy isn't in great shape. Imports of all goods are down 5% from 2022, thanks to a lack of demand, which seems to be fueled by high deflation and debt. In a deflationary economy, the value of currency increases, which encourages consumers to hold their money so that it keeps becoming more valuable.
Although China has spent these billions of dollars in pursuit of making itself autonomous when it comes to chip production, there's still one problem: it can't make the production equipment all on its own today. That China is spending so much on imports highlights that even if it has all of this equipment, China is still reliant on Western countries in a crucial part of the semiconductor manufacturing process.
However, that doesn't mean China's efforts have been for nothing, as producing its own chips has tangible benefits. There's a significant economic benefit as China will likely pay less for chips, and that money won't leave the country. Plus, Chinese-made chips can come with Chinese-specific technology like the country's encryption standards. Additionally, China has already shifted its attention towards semiconductor machinery to achieve even more self-reliance.
