China’s state-backed sector associations covering internet companies, semiconductor firms, auto makers and communications network operators have called on their respective members to shun chips from U.S. suppliers in retaliation against the U.S.' latest sanctions, which could deal a blow to China-based subsidiaries of Nvidia, Qualcomm and Intel. The Internet Society of China, the Chinese Association of Automobile Manufacturers (CAAM), the China Semiconductor Industry Association (CSIA) and the China Association of Communication Enterprises issued statements urging their members to be “cautious” about buying chips from American suppliers, following the Biden administration’s fresh sanctions.
The move reflects these industries’ concerns after the U.S. government blacklisted another batch of 140 Chinese semiconductor enterprises and their suppliers last week. New measures by the U.S. Commerce Department’s Bureau of Industry and Security impose export restrictions on 24 types of chipmaking equipment and three categories of software essential for semiconductor development. A significant focus is on superfast high-bandwidth memory (HBM) – seen as vital for AI systems and other advanced computing tasks.
The new U.S. measures have “substantially harmed the healthy and stable development of China’s internet industry” and shaken the trust and confidence in U.S. chip products, according to the statement from the Internet Society of China. Instead, Chinese internet firms should “expand cooperation” with semiconductor suppliers in other countries and regions, while actively using China-made chips, the society said. It counts some of China’s biggest tech companies as members, including Baidu, Alibaba Group Holding, Tencent Holdings, TikTok owner ByteDance, Huawei Technologies and Xiaomi.
“The unified stance expressed by industry associations, particularly the call for prudence in purchasing U.S. chips, is unprecedented,” said Xiang Ligang, Director General of the Zhongguancun Modern Information Consumer Application Industry Technology Alliance. “If the U.S. continues to impose sanctions round after round, it will end up losing the entire chip market, and U.S. chips will only be left at home,” he said. Other Chinese industries may follow to accelerate the adoption of domestic chips, driving local chip breakthroughs, a CITIC Securities report said. On the other hand, some multinational enterprises are likely to implement “China for China” strategies, producing chips in the Chinese mainland to meet local demand, which is expected to boost the development of China’s chip manufacturing sector as a whole.
The China Association of Automobile Manufacturers also said that the Chinese automotive industry’s trust and confidence in purchasing chip products from U.S. companies are being “shaken”. Last year, China accounted for about 30% of global semiconductor demand, but its production represented only 7% of the global total, with a self-sufficiency rate of approximately 23%. Of this, 12% came from domestic enterprises while 11% was contributed by foreign companies manufacturing in China.
China's semiconductor industry has demonstrated a remarkable surge in self-innovation in recent years, particularly in the face of escalating sanctions and export restrictions imposed by the U.S., the Global Times comments. Rather than retreating in the wake of these challenges, Chinese chip manufacturers have accelerated their efforts toward domestic production, achieving significant advancements across various sub-sectors. This development not only highlights the resilience and innovative spirit of China's chip industry but also signals the failure of Washington's strategy to contain China's technological development. The latest round of U.S. export restrictions has targeted critical areas of semiconductor manufacturing equipment, such as coating and developing, etching, and thin-film deposition, which are precisely the strengths that China's chip industry has been striving to develop in recent years. It is the significant progress made by the Chinese chip industry in these key areas, coupled with its strengthening innovative capabilities, that has prompted the U.S. to intensify its efforts to contain China's chip sector through blockades and suppression even more.
This approach will not only fail to stop the advance of China's chip industry but will also stimulate even stronger motivation for independent innovation among Chinese chip companies. Data from China's General Administration of Customs (GAC) showed that in the first 10 months of 2024, China's total export value of integrated circuits reached CNY931.1 billion, an increase of 21.4% year-on-year. This figure surpasses exports of automobiles, mobile phones, and home appliances, the Global Times notes.
This overview is based on reports by the China Daily, the Global Times and the South China Morning Post.
