China's chip output up 3.8% in April, first growth in 16 months

China’s integrated circuit (IC) output in April saw its first monthly growth in 16 months, as the government continues to push the local industry to boost domestic chip production in the face of declining imports amid U.S. restrictions. Production data for ICs, which covers companies with an annual turnover above CNY20 million, showed 3.8% year-on-year growth to 28.1 billion units in April, the first monthly increase since January 2022, according to the National Bureau of Statistics (NBS). The increase came after March output recorded a decline of just 3% from a year ago, compared with the 17% year-on-year drop in the first two months, pointing to a recovery in chip production in the world’s largest semiconductor market.

The uptick in output comes at a time when China’s chip imports from South Korea and Taiwan have plunged, reflected in the overall IC import data. In the first four months of the year, China’s total IC imports shrank 21% from a year ago to 146.8 billion units, according to the General Administration of Customs (GAC). As the U.S. moved to tighten restrictions on China’s access to advanced semiconductor technologies and equipment, China has shifted to producing more legacy chips to meet domestic demand from carmakers and home appliance manufacturers. China’s chip output saw drastic declines in 2022 amid economic headwinds, stringent Covid-19 restrictions and an escalating tech war with the U.S.

In 2022, China produced 324.2 billion ICs, down 9.8% from 2021. The biggest monthly decline was last October, when IC production volume slumped 26.7% to 22.5 billion units. Local governments in China – including Nanjing and Suzhou in Jiangsu province – have answered the central government’s call by offering lavish subsidies to semiconductor-related firms. The government gave more than CNY12.1 billion in subsidies to 190 domestically-listed semiconductor companies in 2022. Separately, China’s shipments of personal computers dropped 19.9% year-on-year to 25.4 million units in April, up slightly from the 21.6% drop in March, according to the National Bureau of Statistics (NBS). In the same month, smartphone output in the country fell 5.9% to 86.5 million units, narrowing from the 6.7% decline in the previous month, the South China Morning Post reports.

Meanwhile, China’s semiconductor developers are shifting to the RISC-V architecture amid growing chip demand in cars, data centers and AI, also trying to cut reliance on foreign chip IP suppliers. RISC-V is an open-source, royalty-free chip design, but ICs built on proprietary Arm and x86 architectures continue to dominate the global market. Adoption of RISC-V in China has experienced fast growth since 2018, the same year when Nuclei – the country’s first RISC-V IP vendor – was founded. Pricing is one of the biggest factors for chip designers to consider RISC-V IP.