World Stock Watch

China’s Chip Makers Vow to Speed Up Localization Amid Fresh US Curbs

The latest round of US export controls targeting Chinese chip companies has prompted a swift response from the industry, with many vowing to accelerate supply chain localization and maintain production levels.

Building Equipment Stockpiles

Companies like Naura Technology Group and ACM Research, which were among the 140 entities restricted by the new curbs, are confident that their recent efforts to build equipment stockpiles will help them weather the storm. Empyrean, a maker of electronic design automation tools, believes its inclusion on the list will have little impact on operations and sees it as an opportunity to accelerate localization.

Managing Disruption

While Chinese authorities have condemned the move as “economic coercion,” analysts say the curbs are less stringent than feared and will have a manageable impact on the industry. The restrictions target the “weakest spot” in China’s semiconductor industry, which relies heavily on foreign equipment for manufacturing. As a result, capital expenditure by the Chinese chip industry is expected to fall by $10 billion next year.

Ramping Up Purchases

However, Chinese chip firms have been preparing for this eventuality by ramping up purchases of foreign-made equipment from companies like ASML and Lam Research. China’s imports of semiconductor equipment have increased by a third to $24.12 billion in the first nine months of this year.

A Surprising Exclusion

The exclusion of ChangXin Memory Technologies (CXMT), China’s leading manufacturer of a key component in AI chips, from the entity list has raised eyebrows. The Biden administration aims to limit China’s ability to access and produce chips that advance AI for military applications or threaten US national security.

South Korean Suppliers Breathe a Sigh of Relief

Shares of South Korean equipment suppliers to CXMT, such as Jusung Engineering and Mirae Corp, rose on Tuesday after its exclusion from the list. Analysts say the development has brought short-term relief to South Korea’s chip sector, as their China-bound revenue is unlikely to be significantly affected for now.