US Chip Curbs Not as Effective as Washington Thinks

According to Chinese industry analysts, the US is going to extend limits on semiconductor-related shipments to China, indicating that the bans have not been as successful as Washington expected and have simply put American enterprises in danger.

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According to Trade Algo, Washington is seeking to strengthen restrictions on chipmaking machine exports to China, potentially doubling the number of machines that require special permits for export. Currently, roughly 17 of the multimillion-dollar equipment requires licenses for sale to China.

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"If the prior limitations were working, Washington would not need to continue attempting to improve them," Xiang Ligang, director-general of the Beijing-based Information Consumption Alliance, told the Trade Algo on Sunday.

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There is no doubt that limitations on core technology exports to China, such as lithography machines, may hinder the country's development of sophisticated semiconductors, but most of the manufacturing equipment itself, according to Xiang, is not beyond the output capabilities of Chinese developers.

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"Forcing Chinese enterprises to use domestically manufactured chips and manufacturing equipment only accelerates the expansion of domestic industry," Xiang observed.

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According to Ma Jihua, a senior industry expert and close observer of China's chip business, Chinese chip makers have witnessed significant development in the last two years, and the influence of both quantitative and qualitative change is developing.

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Analysts remarked that Chinese firms have considerably encouraged import substitution while also increasing their global market share.

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According to statistics from the General Administration of Customs, China's imports of integrated circuits declined 26.5 percent year on year to 67.58 billion units in the first two months of 2023, while the import value fell 24.9 percent to 329 billion yuan ($47.6 billion).

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Analysts said the limits may slow the country's development in the near term, but they will accelerate the push for self-sufficiency in the long run, citing Chinese enterprises' ongoing investment in R&D.

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According to government figures, China's R&D spending would amount to 3.087 trillion yuan in 2022, with investment in fundamental research increasing from 49.9 billion yuan in 2012 to around 195.1 billion yuan in 2022.

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Analysts believe that players from the United States and its allies are facing a different and less bright future, as they may be forced to withdraw or partially withdraw from the world's largest semiconductor industry.

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American companies have seen their share values fall, forcing them to warn investors that losing the Chinese market may cost them a lot of money.

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Intel Corp's revenue fell 32% year on year to $14 billion in the fourth quarter of 2022. According to Trade Algo, the corporation has decided to reduce its dividend distribution to the lowest level in 16 years and to scale back large expenditures in order to save money.

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Meanwhile, several top American IT corporations have laid off employees. The American firms, as well as "of course, the US allies' companies, whom the US never cared about," would finally pay the price, according to Xiang.

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The US has struck deals with the Netherlands and Japan to force or cajole its allies to join its sanctions on China.

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Although the CEO of the Netherlands chip-gear major ASML Holding complained about losses due to US restrictions, the Dutch government followed Washington's lead and announced intentions to put more export restrictions on the "most sophisticated" semiconductor technology to China on Wednesday.

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Analysts emphasized that by interfering with routine economic and commercial activity, such acts substantially impede the functioning of the global supply chain and technological progress.

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