Tuesday, November 19, 2019
China Reportedly Proposes to increase U.S. Semiconductor Purchases Five Times over Six Years
The U.S. Unlikely to Accept China's Proposal
China Reportedly Proposes to increase U.S. Semiconductor Purchases Five Times over Six Years
  • By Michael Herh
  • February 18, 2019, 10:54
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China has reportedly proposed to increase its U.S. semiconductor purchases to US$200 billion (225.90 trillion won) in the next six years, a five-fold increase from the current level.

South Korean semiconductor companies are keeping their eyes and ears open as China has reportedly proposed to increase its U.S. semiconductor purchases to US$200 billion (225.90 trillion won) in the next six years, which is about a five-fold increase from the current level. However, many experts say that the United States, which is keen to keep China’s semiconductor ambitions in check, is least likely to accept China’s proposal, as it will increase its semiconductor dependence on China.

Domestic companies are showing a cautious response to China’s proposal for two primary reasons.

First, China has refrained from mentioning a specific type of semiconductor it will purchase. A senior official of a domestic semiconductor company said, “China did not say what kind of semiconductor chips it will import, whether it is a memory, central processing unit (CPU) or system semiconductor chip. Given the circumstances, it is hard to predict the effects on South Korean companies.”

Another senior official also said, “Even if it is a memory chip, it will be difficult for U.S.-based Micron Technology Inc. to increase supply to China by two or three times within six years.” It takes more than two years and costs 20 trillion won to 30 trillion won (US$17.71 billion to 26.56 billion) to invest in one memory production line alone. Some point out that it is almost impossible to increase the output in a short period of time since an oligopoly system is in place in the memory industry.

In this context, China may increase imports of communications chips from Qualcomm or system semiconductor chips if the reported proposal is true. An industry insider said, “Samsung Electronics Co. produces NAND flash chips in Xian in China, while SK Hynix Inc. manufactures DRAM chips in Wuxi. Even if China increases imports of U.S. memory semiconductors, the two companies are less likely to take a blow.”


It is worth noting that the United States shows a negative reaction to China’s proposal. The Wall Street Journal quoted John Neuffer, president & CEO at the U.S. Semiconductor Industry Association (SIA), as downplaying the proposal as a trick intended to accomplish “China Manufacturing 2025.”

An industry watcher said, “The United States has placed a ban on semiconductor equipment exports to DRAM producer Fujian Jinhua Integrated Circuit Co. (JHICC) and it is punishing Huawei Technologies Co. and ZTE Corp. in the name of the national security. The United States is unlikely to accept China’s proposal with good grace.”