Chinese chip firms, including Naura Technology and ACM Research, are confident in overcoming new US export restrictions. By speeding up supply chain localisation and leveraging stockpiled equipment, they aim to maintain production.
Chinese Chip Firms’ Resilience Amid US Export Curbs
Chinese chip firms, including industry leaders like Naura Technology Group and ACM Research, have vowed to adapt to the latest set of export restrictions imposed by the United States. These restrictions, targeting essential chipmaking equipment and software, are the third such crackdown in three years. Despite the potential challenges, many Chinese companies are confident they can continue their operations by speeding up the localisation of their supply chains and drawing from stockpiled equipment.
The Latest US Export Curbs and Their Impact on Chinese Chip Firms
The US has introduced new export controls that restrict the sale of vital semiconductor equipment and technology to 140 Chinese companies. These include major players in the Chinese chipmaking industry such as Naura Technology Group, a key producer of chip equipment, and ACM Research, a maker of advanced semiconductor equipment. The aim of these measures is to limit China’s access to technology that could be used to develop chips with military applications or advanced artificial intelligence (AI) capabilities.
Despite the US government’s stated intentions, the restrictions have not caused an immediate disruption in the semiconductor market. Stock prices for Chinese chipmaking companies remained stable or even rose following the announcement. This reaction suggests that analysts may have already factored the possibility of such measures into their expectations, and the curbs may not be as severe as originally feared.
Localisation Efforts: How Chinese Chip Firms Are Mitigating the Impact
Chinese chip firms have been working to reduce their dependence on foreign suppliers for critical equipment. One of the key strategies they are pursuing is supply chain localisation. This involves sourcing more materials and equipment domestically, which has been made possible by previous efforts to ramp up domestic production capabilities.
Empyrean, also known as Beijing Huada Jiutian Technology, a leading maker of electronic design automation (EDA) tools, has stated that its inclusion on the US export control list will not significantly disrupt its operations. The company is taking the opportunity to accelerate its efforts to localise the development of full-process EDA tools. Similarly, Jiangsu Nata Opto-Electronic Material, a supplier of materials used in chipmaking, has stockpiled essential equipment and is working on finding domestic substitutes for materials that are harder to source locally.
Chinese Chip Firms’ Strategic Stockpiling to Mitigate Disruptions
In addition to localisation, Chinese chip firms have focused on building significant stockpiles of critical equipment. This stockpiling effort is seen as a way to buffer the impact of potential disruptions caused by the US restrictions. Many companies in China’s semiconductor sector have been preparing for export controls by securing equipment and software before the curbs were fully implemented.
Beijing Huafeng Test & Control Technology, a provider of semiconductor test systems, has fully localised its supply chain, which reduces its reliance on foreign suppliers. According to reports, this preparedness will help the company continue operations smoothly despite the US measures.
Chinese Chip Firms and the US’s “Economic Coercion” Accusation
The Chinese government has strongly condemned the new US export restrictions, labeling them as a form of “economic coercion.” Despite these criticisms, the measures appear to have little impact on the immediate prospects of Chinese semiconductor companies. Shares in Chinese chip firms actually saw slight increases following the announcement, with analysts noting that these curbs were less severe than expected.
While the US curbs aim to target the most vulnerable parts of China’s semiconductor supply chain, the efforts to localise and stockpile resources are helping to insulate Chinese chip firms from long-term disruptions. Many analysts now believe that the ongoing development of China’s semiconductor sector will continue at a steady pace, despite the challenges posed by the US restrictions.
The Long-Term Outlook for Chinese Chip Firms in the Face of US Curbs
The broader implications of these curbs for China’s semiconductor industry remain to be seen. However, analysts suggest that the impact will likely be manageable in the short term, with the long-term effects potentially being more significant. As the Chinese chip industry has already ramped up imports of advanced equipment, including lithography machines from Dutch company ASML and chipmaking tools from US-based Lam Research, these curbs may not disrupt progress as much as anticipated.
Jefferies analysts predict that capital expenditure in China’s chip sector will fall by about 30% in 2025, but others argue that Chinese chipmakers will still be able to continue their growth trajectory, particularly in areas like AI chip production. As the market for chips grows globally, Chinese companies will likely continue innovating and adapting to the evolving technology landscape.
Conclusion: The Path Forward for Chinese Chip Firms
The latest US export curbs on Chinese chip firms, while significant, are unlikely to drastically hinder the growth of China’s semiconductor industry in the near term. Through strategies like localisation, stockpiling, and domestic substitutions, Chinese companies are working to safeguard their operations and maintain production capacity. While these curbs may challenge the Chinese chip sector, they also present opportunities for innovation and growth within the domestic supply chain, positioning Chinese chip firms to thrive despite external pressures.