The US-China semiconductor trade row is growing | Awareness

This analysis was made by Bloomberg Intelligence Analyst Clelia Imperiali. It first appeared on Bloomberg Terminal.

Rising trade and national security measures aimed at reducing control of Chinese semiconductor companies continue to threaten trade between China and the US. While U.S. duties on more than $3.5 billion in Chinese chip sales remain in place, it’s the ban on imports from both sides that could weigh heavily on chip makers.

A US-led increase in semiconductor exports to China threatens to destroy US companies and their allies. As Japan and the Netherlands join the US curbs and China retaliates with limits on manufacturing equipment, both production and a large share of the sales of Western chipmakers from China – including 15% of ASML, 28% of Tokyo Electron – is coming down. increased strength.

The world’s largest chipmaker’s sales, China’s flagship show

Intel and Qualcomm are among the top US semiconductor companies with the most investments in China (a combined $45 billion in 2022). Their sales in China fell by 2-3 percent in 2021-22. Many non-Chinese companies share their share capital in the country, and this may be less than in 2023. The Netherlands and Japan have agreed to October measures in early Q1, and others may follow.

Restrictions on US exports, licensing requirements, organizations and labor restrictions are adding to the growing scrutiny of Chinese takeovers by the US Committee on Foreign Investment (where China accounted for 12.5% ​​of all foreign investment in 2021).

Thailand, Vietnam can benefit from China’s westward movement

Policies aimed at avoiding tensions between the United States and China are expected to encourage immigration to other East Asian countries, which could boost the sales of small companies such as Thailand’s Silicon Craft Technology. APAC is the fastest growing chip investment region after China (30% in 2022), while Vietnam and Thailand have both introduced new incentives for domestic businesses in 2021-22.

In February, Japan’s Kyocera announced its intention to reconsider China as a manufacturing center for the company’s exports, following similar news in 2022 with Samsung and SK Hynix.

Taiwan plans to join the popularity of chips in the middle of the US-China row

TSMC’s sales growth in Taiwan – with revenue expected to double from 2019 to about $76 billion in 2022 – could be boosted by the US-China row in semiconductor technology. Sales in North America can drive the trend, after the December 2022 announcement of the expansion of the US space. TSMC is Taiwan’s largest semiconductor company and a global leader, accounting for half of the world’s total semiconductor production.

Taiwan is already home to 13% of US companies with semiconductor capital, and has one of the highest (third after the US and Europe) percentage of R&D investment as a share of market sales – 11%, according to the Semiconductor Industry Association.

China’s restrictions on Chinese steel imports reached a high level

China’s export restrictions on two metals that are essential for semiconductors (gallium) and fiber-optic equipment and solar panels (germanium) from Aug. 1 is expected to raise the cost of several high-tech industries. The US accounts for only 7% and 16% of the world’s buyers of germanium and gallium produced in China, respectively, but the visibility of US exporters in Beijing is very high, while China is the largest importer of the metal in the country, accounting for 22. % and 35%, respectively, of all US exports in 2022.

China’s role in the trade dispute is also reinforced by the fact that the country is the largest producer of germanium and gallium (60% and 80%, respectively, according to the Critical Raw Materials Alliance).

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