China’s Tech Distress Grows as U.S. Chip Sanctions Bite

livemint.com:

China’s tech sector is showing the strain from last year’s sweeping U.S. export restrictions, which seek to stall Beijing’s ambitions in cutting-edge industries such as artificial intelligence and supercomputing. Semiconductor imports to China are falling.

Chinese companies say they are struggling to get key components and machinery. And chipsets that have been remodeled to make them less powerful so they fall within U.S. rules are now threatened by the possibility of additional restrictions.

The distress signals show Washington’s nine-month-old policy of denying Beijing access to the most advanced semiconductors and the tools to make them is starting to bite, despite loopholes and workarounds keeping some key components flowing. The restrictions also show the obstacles facing China in developing domestic alternatives for some of the most sought-after foreign semiconductor technologies. “The controls appear to be making it harder and costlier for China to gain certain inputs," said Emily Benson, a senior fellow specializing in trade and technology at the Center for Strategic and International Studies think tank.

Customs data released by Beijing this month highlighted the reality for Chinese buyers of high-end chips: Imports of semiconductors fell by 22% in value terms during the first six months of 2023 from a year earlier. Imports of chip-manufacturing equipment dropped by 23%, extending last year’s decline. Leading chip-manufacturing regions accounted for the lion’s share of the decline in semiconductor imports.