China spends record $31bn to buy up microchip equipment

CHINA has spent record sums on microchip equipment as it races to supercharge its industry to beat US sanctions.

Official data show China imported $10.6bn worth of semiconductor equipment in the final three months of last year, Barclays analysts said, a yearly total of more than $31bn (£24bn).

It comes as the US and other countries have blocked the sale of the most powerful microchips to China, fearing they will be used in sensitive areas such as the military, artificial intelligence and cyber security.

The Chinese state is investing heavily in developing its domestic industry in an attempt to overcome Joe Biden’s sanctions. It celebrated a breakthrough last year when Huawei developed a high-end phone made largely with Chinese components.

Alicia Kearns, chairman of the foreign affairs select committee, said China was seeking to boost its domestic industry to undermine Taiwan. She said: “[China] will use its position to establish geopolitical leverage and undermine our national security. Chips may sound insignificant or small, but they power our economies and the technologies in our lives. Its purchase... despite export restrictions imposed by the UK, US and our allies, is troubling and demonstrates we must tighten restrictions.”

China was rushing to buy equipment ahead of more sanctions in early 2024, according to the analysts at Barclays.

The purchases are believed to include high-end equipment from Dutch tech giant ASML, which makes advanced lithography machines needed to make the most intricate microchips.

Imports of these machines into China more than quadrupled at the end of 2023, reaching a record $2.7bn. Britain’s total exports of semiconductor manufacturing equipment to China totalled around $314.6m last year, despite the Government blocking dozens of export licences.

The UK is a relatively small player in exporting semiconductor manufacturing equipment but still sells abroad through companies such as SPTS and Oxford Instruments, which make machines for processing semiconductor wafers. Data from the Department for Trade show that 27 licence applications for exporting semiconductor manufacturing equipment to China were refused in the first six months of last year. Just six were issued and one licence was revoked.

The figures were in stark contrast to the prior year, when it had issued 11 licences and refused just two. The $315m of equipment exported to China last year was down from the $353m in 2022, but more than double what was sold to the country in 2019, according to figures from China’s general administration of customs.

This has led the country to invest billions into its domestic industry, although it is still seen as years behind the most advanced chipmaking facilities, which are primarily in Taiwan.

‘China will use its position to establish geopolitical leverage and undermine our national security’