Tech war: Chinese chip output up 3.8 per cent in April, first monthly growth in 16 months

Production data for ICs was up 3.8 per cent year on year to 28.1 billion units in April, according to data released by the National Bureau of Statistics on Tuesday
The uptick comes as China’s chip imports from South Korea and Taiwan have plunged, reflected in the overall IC import data which shrank 21 per cent in the first four months

Semiconductors

Ann Caoin Shanghai

Published: 5:30pm, 16 May, 2023

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China’s integrated circuit (IC) output in April saw its first monthly uptick in 16 months, as Beijing continues to push local industry to boost domestic chip production in the face of declining imports amid US restrictions.

Production data for ICs, which covers companies with an annual turnover above 20 million yuan (US$2.9 million), showed 3.8 per cent year-on-year growth to 28.1 billion units in April, the first monthly increase since January 2022, according to data released by the National Bureau of Statistics (NBS) on Tuesday.

The increase came after March output recorded a decline of just 3 per cent from a year ago, compared with the 17 per cent 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 per cent from a year ago to 146.8 billion units, according to data released last week by the General Administration of Customs.

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As the US 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.

In April, the “output growth” of industries with an annual turnover of more than 20 million yuan – a rough measure of the country’s industrial activities – increased 5.6 per cent year on year, marking the biggest monthly increase since last October.

China’s chip output saw drastic declines in 2022 amid economic headwinds, stringent Covid-19 restrictions and an escalating tech war with the US.

In 2022, China churned out 324.2 billion ICs, down 9.8 per cent from 2021. The biggest monthly decline was last October, when IC production volume slumped 26.7 per cent to 22.5 billion units.

Last October, the Bureau of Industry and Security, an agency under the US Department of Commerce, announced tighter export controls to curb China’s access to advanced chips, chipmaking equipment and US talent. In response, China doubled down on its semiconductor self-sufficiency drive to boost domestic output of microchips and reduce its reliance on overseas products.

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Local governments in China – including Nanjing and Suzhou in eastern Jiangsu province – have answered Beijing’s call by offering lavish subsidies to semiconductor-related firms. The government doled out more than 12.1 billion yuan in subsidies to 190 domestically-listed semiconductor companies in 2022, according to industry data.

Separately, China’s shipments of microcomputers dropped 19.9 per cent year on year to 25.4 million units in April, up slightly from the 21.6 per cent drop in March, according to NBS data. In the same month, smartphone output in the country fell 5.9 per cent to 86.5 million units, narrowing from the 6.7 per cent decline in the previous month.