China in ‘Word War’ With USA for Lithography Machines

China is in a major run to stock lithography machines as the US share some firm actions against exports of lithography machines.

The USA has recently put a few strategic restrictions on the export of lithography machines, to which, China has been a major importer of these chip-making machines.

In recent years, China has increased its imports of chip-making equipment including lithography machines for several other countries including majorly Netherlands.

In 2023, China imported nearly $40 billion worth of machines which helps in the process of making semiconductors. While it is learned that in 2021, China imported these semiconductor-making equipment to more than a whopping $41 billion.

According to data from the General Administration of Customs of China, excluding equipment for wafer and display manufacturing, China imported semiconductor equipment for IC manufacturing worth US$27.4 billion in 2023, up 46.48% from a year ago. Chinese imports of IC manufacturing equipment doubled every month since September, with imports in December, ahead of the month when the Netherlands’ export curbs on advanced semiconductor equipment took effect, increasing by 190.27% in value terms and 29.28% in unit terms.

In a report, Bloomberg mentioned that China’s imports of chips stalled firmly last year, slumping to $350 billion which is a new declining trend from the last two years. Whereas, China’s shipment volume also plummeted by 11% over the same period.

In 2019 and 2020, China imported 40 and 57 lithography machines from the Netherlands, respectively. The figure quickly rose to 93, 78, and 176 units in the following three years. During the past five years, China imported a total of 444 lithography machines from European trading partners. Besides lithography machines, China also imports other equipment for IC manufacturing, such as CVD equipment, dry plasma etching equipment, PVD equipment, and step and repeat aligners from the Netherlands.

Lithography machines have been the key equipment in the growth of China’s semiconductor industry. The USA is reported to have intervened to halt China’s efforts to develop its chip-making industry and export Chinese chips across new markets.  

The imports of lithography equipment from the Netherlands would have been higher if not for the US asking ASML to cancel the shipment of some DUV machines to China in December, which was confirmed by ASML in a statement.

Amid the rising demands for expanding the production in semiconductor manufacturing, China also witnessed a surge in ASPs for importing IC manufacturing equipment, as ASPs for equipment imported from the Netherlands rose from about US$14 million in 2022 to nearly US$30 million in 2023, highlighting a rise in imports of relatively high-end DUV machines when local demands for low-end equipment may have been met with local supplies.

“The U.S. side has instrumentalized and weaponized export controls and even bluntly intervened in normal trade between enterprises in other countries, which China firmly opposes,” said Shu Jueting, a spokesperson for the Chinese Ministry of Commerce.

“We urge the Dutch side to respect the spirit of contracts, support enterprises in conducting trade in compliance with regulations and maintain a free, open, just and non-discriminatory international trade environment,” she said at a press conference.

“China will closely follow the development and impact of the issue and take necessary measures to firmly safeguard the legitimate rights and interests of Chinese companies,” Shu added.

Meanwhile, during 2023, the months with the fastest growth in China’s import of Japanese semiconductor equipment were July and December. Japan’s export curbs on semiconductor equipment took effect on July 23, 2023. Over the past year, Japan-based semiconductor equipment suppliers saw their sales generated in China rise, accounting for 30-50% of their revenues.

Miniaturization and compact forms of electronics are bringing a new era to the semiconductor designing process. Currently, with the advancement of modern semiconductors, billions of transistors are integrated into one chip. This complex design process has become a reality, with lithography machines. IBM made the first breakthrough in lithography machines in 2016 and since then has become an integral equipment in modern semiconductor manufacturing.