China’s chip imports record steepest drop this year amid manufacturing disruptions, tech war with US, economic headwinds

Chip imports fell 14.4 per cent to 498.5 billion units in the 11 months ended November 30, down from 582.1 billion in the same period last year
Semiconductor exports also continued to decline, falling 11.7 per cent year on year to 250.5 billion units in the 11 months to November

Semiconductors

Ann Caoin Shanghai

Published: 5:00pm, 7 Dec 2022

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China’s chip imports recorded their steepest drop this year in the 11 months ended November 30, according to the country’s latest customs data, as disruptions in manufacturing activity, a sweeping tech war with the US and economic headwinds continue to weigh on the world’s biggest market for semiconductors.

Integrated circuit (IC) imports fell 14.4 per cent to 498.5 billion units during those 11 months, down from 582.1 billion in the same period last year, according to data released on Wednesday by the General Administration of Customs. That decline surpassed the 13.2 per cent decrease in the first 10 months of 2022.

The total value of imported ICs, however, contracted just 1.8 per cent to US$381.2 billion during the first 11 months of this year. This means China has been buying chips at a higher cost, despite an overall reduction in semiconductor prices around the world because of a supply glut and a slowing global economy.

China posted a 1.4 per cent month-on-month decline in chip imports to 40.5 billion units in November, down from 41.1 billion in October. Still, that marked an improvement from the previous month, when IC imports tumbled 13.7 per cent from September.

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China’s IC exports, meanwhile, continued their accelerated pace of decline, falling 11.7 per cent year on year to 250.5 billion units in the 11 months to November – down from a 10.8 per cent drop in the first 10 months of this year. Total value of chip exports during that 11-month period rose 2.2 per cent year on year.

Semiconductors have long been China’s biggest import, having surpassed crude oil and bulk commodities years ago. But chip imports started to shrink at the beginning of the year, with numbers for January and February marking the first year-on-year drop since the beginning of 2020, according to official customs data.

The latest figures on shrinking chip imports reflect how widespread Covid-19 curbs have disrupted China’s factory activity, which further slowed in November.

The official manufacturing purchasing managers’ index (PMI) fell to 48 in November, down from 49.2 in October, according to data from the National Bureau of Statistics (NBS). This was the lowest reading since April after remaining below the 50-mark that separates growth from contraction on a monthly basis for a second consecutive month.

The Caixin/S&P Global manufacturing PMI, a private-sector survey, recorded its fourth monthly contraction in a row in November.

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The Caixin/S&P Global manufacturing PMI, a private-sector survey, recorded its fourth monthly contraction in a row in November.

The accelerated decline in chip imports has also come amid fresh trade restrictions imposed by Washington in early October, which coincided with a global downturn in the semiconductor industry as a chip shortage turned into a glut.

The global semiconductor industry recorded total sales of US$46.9 billion in October, down 4.6 per cent from a year earlier, which marked the largest percentage decline since December 2019, according to data released on Monday by the Washington-based Semiconductor Industry Association.

The Bureau of Industry and Security (BIS), an agency under the US Department of Commerce, on October 7 implemented updates that further restrict China’s ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors used in military applications, including weapons of mass destruction.

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In addition, Washington added 31 Chinese tech firms, research institutions and related entities to the US Unverified List. Parties whose bona fides have not been substantiated by the BIS are put on this list, which serves as a trade restriction since those on it are ineligible to receive items subject to the US government’s Export Administration Regulations.

China’s IC output, meanwhile, contracted by 26.7 per cent in October from a year ago, which marked the biggest monthly decline on record for the domestic semiconductor industry, amid weak demand that mirrored the country’s first export growth decrease in more than two years.

Chip production in October, which totalled 22.5 billion units, showed a larger percentage drop in volume compared with the 24.7 per cent slump in August, according to NBS data. October saw the largest single-month decrease since records began in 1997.