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American sanctions against China aimed at slowing down the growth of the Chinese semiconductor industry are starting to bear fruit as equipment imports by the Asian country dropped heaving in 2022, according to data from China's General Administration of Customs. At the same time, they have also constrained China's largest chipmaker, the Semiconductor Manufacturing International Corporation (SMIC), ability to build a new manufacturing plant in Beijing, creating a potential six-month delay for mass production, according to the firm.

China's SMIC Struggles To Expand Production In Light Of U.S. Chip Sanctions

China's General Administration of Customs is responsible for taxing and managing the imports and exports within the country. Its data for 2022, released earlier this month, outlined that total semiconductor equipment imports in the country stood at $35 billion, which marked a 15% annual drop. In 2021, Chinese firms and related entities had imported $41.7 billion, with last year's imports dominated by chip manufacturing equipment. Data shows that out of the $35 billion in imports, more than half, or $19 billion, accounting for equipment imports.

The data comes after U.S. sanctions restricted the sale of certain chipmaking equipment to China, and a ban by the Dutch semiconductor manufacturing machine manufacturer ASML from selling advanced extreme ultraviolet (EUV) machines to the country as well. These restrictions have also contained SMIC from expanding its manufacturing capacity, with another report from JW Insights quoting the firm's management about a new plant in Beijing.

SMIC, which plans to make chips on the 7-nanometer chip manufacturing technology, is building three new plants in Shenzhen, Shanghai and Tianjin. At the same time, it is also installing chip manufacturing equipment in a new Beijing fab, and according to the company, American sanctions have delayed this facility.

According to the details, delays in equipment deliveries have postponed the fab's timelines, and the statements made on the 6th of this month follow up on earlier comments in January in which SMIC's management had outlined that equipment "bottlenecks" would delay the fab's progress by as much as six months.

SMIC has faced the worst of both worlds recently, as in addition to the U.S. sanctions, it has also had to deal with a slowdown in the global semiconductor industry. This slowdown is expected to harm the Taiwan Semiconductor Manufacturing Company's (TSMC) revenues as well, and caused firms such as Advanced Micro Devices, Inc and NVIDIA Corporation to report massive revenue dropsas consumers continue to digest excess shipments made in the wake of the coronavirus pandemic.

While Chinese chipmaking equipment imports dominated trade for the semiconductor sector, the country also exports to regions such as India and Taiwan. Yet, at the same time, estimates suggest that the local semiconductor industry is also facing a talent shortage alongside a lack of equipment.

Estimates suggest that up to 700,000 skilled workers are required in the chip sector, alongside 40,000 qualified individuals. This shortage has hampered chip design and development efforts, even as officials vow to develop indigenous chip manufacturing at part with global firms such as TSMC, Intel and Samsung.

Recent data released by the Semiconductor Industry Association (SIA) covering global chip sales for January shared that they had dropped by 18.5% - with China being the hardest hit region as sales fell by 32% annually.