China urgently seeks alternatives to semiconductor sanctions… U.S. CEOs meet at APEC
Eugene Park Views
China is struggling to find alternatives amidst the intensification of U.S. semiconductor sanctions. On one hand, China is making efforts to procure semiconductor equipment from the Netherlands’ ASML, and on the other hand, it is buying Huawei chips in bulk as an alternative to Nvidia’s artificial intelligence (AI) chips. Chinese President Xi Jinping is making strenuous efforts to circumvent sanctions, including planning a dinner with representatives of major U.S. companies during the Asia-Pacific Economic Cooperation (APEC) summit next week.
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On the 8th, the South China Morning Post (SCMP) reported that China’s imports from the Netherlands surged 29.5% in October compared to the same period last year. The SCMP reported, “Although the scale of trade between the European Union (EU) and China decreased by 7.5% compared to the same period last year, the Netherlands alone increased.” It added, “China is buying a large amount of advanced lithography equipment from ASML, one of the most important companies in the semiconductor supply chain.”
In September, the Netherlands decided to ban the export of old deep ultraviolet (DUV) equipment to China from January next year, in addition to existing extreme ultraviolet (EUV) equipment. This is a result of pressure from the United States. Immediately, China embarked on a buying spree of ASML semiconductor equipment. According to Chinese customs, the scale of semiconductor equipment imported from the Netherlands in September was $1.3 billion, an increase of 1850% from a year ago. As a result, the proportion of ASML’s third-quarter sales in China surged sharply from 8% in the first quarter of this year to 46%. Rem Korteweg, a senior researcher at the Clingendael Institute, a Dutch think tank, said, “China is buying all the ASML equipment it can get its hands on.”
With the U.S. sanctions cutting off the import of AI chipsets, China is also accelerating the search for alternatives. Initially, it planned to import in bulk until mid-November, the grace period for sanctions, but the U.S. blocked exports one step ahead in October. On the 7th (local time), Reuters reported that Baidu, China’s leading IT company, ordered 1,600 ‘910B’ AI chips from Huawei. The total amount is 450 million yuan (approximately $71 million), 60% of which has already been delivered, and delivery is expected to be completed by the end of the year. Reuters reported, “Huawei’s 910B is much less sophisticated than Nvidia’s A800 and H800, which were manufactured for export to China, but it is the most sophisticated chip available in China.” It added, “With the additional U.S. export sanctions, Huawei is expected to secure $7 billion (approximately $9.1 billion) in domestic sales.”
The Chinese government is also investing heavily in promoting the semiconductor industry. With the securing of domestic sales outlets, the speed of technological advancement in the Chinese semiconductor industry, including Huawei, is expected to accelerate even more. Reuters analyzed, “The signs of technological development of Huawei are growing as Chinese state-owned enterprises replace foreign technology with domestic alternatives.”
China is expected to try to persuade U.S. companies along with sanctions countermeasures. Bloomberg reported that President Xi is planning to have a dinner with U.S. company CEOs at the APEC summit in San Francisco from November 11 to 17. Bloomberg said, “President Xi will prioritize calming foreign companies’ concerns about investing in China.” It is interpreted as a strategy to secure ‘friendly forces’ in the U.S. by persuading companies for which trade with China is important.
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