China stockpiles US chips amid fears of worsening trade relations

China is stockpiling US computer chips, a sign that tech companies there are preparing for worsening trade relations that could lead to being cut off from American technology.

Chinese imports of American semiconductors, integrated circuits and the equipment to make them have risen strongly in the past three years, analysis of the latest official data shows, despite overall purchases from the US declining dramatically since 2018 amid the trade war. Imports of chips and related machinery from the US were almost US$1.7 billion in August, the most since at least the start of 2017, and were close to that again in October.

As US President Donald Trump’s tariff war with China morphs into a more general confrontation over future technology, the risk of a “silicon curtain” descending is real for many Chinese firms who are not yet able to source hi-tech components domestically.

“It’s politically intolerable to China that the US has an at-will ability to turn off major companies like ZTE and Fujian Jinhua, as well as being able to deal major operational blows to Huawei,” said Dan Wang, a technology analyst at Gavekal Dragonomics in Beijing. “So the government and the companies are trying to be more technologically independent.”

China has invested billions in an attempt to develop a domestic semiconductor industry. But it still lags in key areas such as high-performance microprocessors and graphics chips.

The US blacklisting of Chinese companies including Huawei Technologies is one factor driving the surge in imports, given the need to stockpile. The emergence of home-grown smartphone brands such as Huawei and Oppo as well as a rapid adoption of cloud computing is also helping propel the import of high-performance silicon.