China's semiconductor imports fall for the first time in two years-EEWORLD

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According to the South China Morning Post, official customs data showed that China's integrated circuit (IC) imports fell 4.6% year-on-year in the first two months of 2022, the first year-on-year decline since the beginning of 2020.

China imported 91.9 billion integrated circuits in January and February, according to data from the General Administration of Customs. However, the value of imports jumped 19.2% to $68.8 billion as a global chip shortage pushed up semiconductor prices.

Monthly year-to-date IC import growth has hovered around 25% over the past two years, with the highest growth rate occurring in March 2021 at 33.6%. But growth began to decline at the end of the year. China combined data for the first two months of the year due to factory closures for public holidays, including New Year’s Day and the week-long Lunar New Year holiday.

"It's too early to determine whether this is a pattern or a rare case because imports this year are not low," said Li Yin, an assistant professor at Fudan University who studies Chinese technology policy and innovation. He added that the earlier date of this year's Lunar New Year, which fell on Feb. 1, may have contributed to the decline.

"Looking at the cost of these ICs, the average price has gone up," Li said. "But we may need to review the composition to determine whether the change was caused by price increases. It is also possible that the proportion of low-cost chips is lower this time." China Customs did not provide a breakdown of the IC categories, which include dynamic random access memory (DRAM) chips and more advanced microprocessor units (MPUs).

Beijing has been pouring money into the semiconductor industry to boost domestic production as its tech war with the United States intensifies. But it has not yet been able to cut its reliance on imported integrated circuits because domestic producers lack the skills and technology to design and manufacture the most advanced chips.

IC imports hit a record high in late 2020 as companies began stockpiling chips due to supply issues related to U.S.-China tensions and the Covid-19 pandemic.

With strong government support, Chinese semiconductor manufacturers accounted for about 9% of global sales in 2020, according to a January report by the Washington-based Semiconductor Industry Association. If China's chip industry maintains a 30% growth rate, it will reach a 17.4% market share by 2024, second only to the United States and South Korea, the report said.

The semiconductor industry continued to be a topic of discussion at this year's "Two Sessions". Senior advisors put forward a number of relevant suggestions.

Li Biao, a deputy to the National People's Congress and president of Shenzhen-listed integrated circuit maker Haite Group, told the media that private enterprises are "one of the most critical but weakest links" in China's integrated circuit industry and that Beijing could offer more support to the industry through procurement and tax incentives.

China's semiconductor production surged 33% last year and will double in 2020

According to data released by the National Bureau of Statistics of China, China's semiconductor integrated circuit (IC) output will reach 359.4 billion pieces in 2021, an increase of 33.3% over the previous year, which is more than double the 16.2% growth rate of the previous year. Yonhap News Agency reported on the 20th that as China continues to promote semiconductor self-sufficiency, Shanghai, one of the centers of China's semiconductor industry, has introduced a new investment policy with a subsidy of up to 30%. The policy includes raising the semiconductor investment limit, giving semiconductor-related industries a subsidy of up to 30%, and giving semiconductor software development companies a subsidy of up to 50 million yuan.

The Chosun Ilbo said that China's semiconductor production showed signs of accelerating. Although these data include the output of foreign semiconductor factories in China, it is China's efforts to achieve the rise of semiconductors that have led to a surge in semiconductor production. The Chinese government is providing large-scale investment and tax incentives to domestic companies with the goal of increasing semiconductor self-sufficiency to 70% by 2025. In 2021, China announced 28 additional factory construction projects with an investment of up to US$26 billion. In addition to non-storage semiconductors such as central processing units (CPUs) for computers and application processors (APs) for smartphones, China currently relies on imports of storage semiconductor products such as flash memory.

The Semiconductor Industry Association (SIA) of the United States predicted on the 10th that Chinese companies' share of the global semiconductor market will increase from 9% in 2020 to 17.4% in 2024, which means that China will become the world's third largest semiconductor producer after the United States and South Korea.

"China's independent chip industry is growing rapidly!" Germany's Wirtschaftswoche said on the 20th that in the face of US sanctions, China has stepped on the gas in the chip industry. Five years ago, Chinese semiconductor manufacturers had global sales of $13 billion, accounting for 3.8% of the global semiconductor market. In 2020, Chinese manufacturers' sales soared 30.8% to $39.8 billion, equivalent to 9% of the global market, ranking second only to Europe and Japan.

German media said that according to current data, China's semiconductor sales in 2021 may approach or even surpass those in Europe and Japan. Analysts believe that it is only a matter of time before China surpasses Europe. As China develops its chip industry on a large scale, it will reduce its dependence on supplies from the United States, South Korea, Europe and other places.

The report said that in addition to developing the latest technologies, China is also expanding the production capacity of mature technologies. Although Chinese manufacturers still have a long way to go to catch up with the world's leading companies in the most advanced process nodes, equipment and materials, the gap will be greatly narrowed in the next decade. China's biggest advantage is that it has the world's largest market, which creates opportunities for domestic companies to expand their business.

Russia's Sputnik News quoted an analysis on the 20th saying that for many years China has been working hard to increase the proportion of value-added products in GDP. As per capita GDP rises, China is losing its original competitive advantage - cheap labor. Global manufacturers are transferring industries such as screwdriver assembly, consumer goods, pollution, and labor-intensive industries from China to other countries with lower incomes. In order to maintain its own development, China needs to move up in the global value chain and strengthen its own technological capabilities.

According to a report by Korea Economy on the 20th, the total scale of global chip sales in 2021 was US$583.8 billion, a year-on-year increase of 25.1%, exceeding US$500 billion for the first time in history. The head of market research firm Gartner said: "The global economy bottomed out and rebounded in 2021. The chip supply chain, especially automotive chips, continued to be in short supply. Coupled with the continuous rise in raw material prices, the average selling price of chips remained high. The global chip market ushered in a new round of explosive growth." South Korean media said that currently, representative Chinese semiconductor companies such as SMIC, Yangtze Memory Technologies, and Unisoc are improving their technical strength and quietly expanding their influence.

World Semiconductor Trade Statistics predicts that the global semiconductor market is expected to grow by 8.8% to $601 billion in 2022. Global semiconductor manufacturers are building 19 new wafer fabs in 2021 and another 10 in 2022 to meet the demand for semiconductor chips. Of the wafer fabs that began construction in 2021 and 2022, 15 are foundries with monthly production capacity ranging from 30,000 to 220,000 wafers.

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