China Begins Buying Up Used Chipmaking Machines As US Sanctions Bite

Facing US sanctions, China’s chipmakers have resorted to buying up and hoarding used chipmaking machines from other countries. Thanks to their buying spree, Japanese used equipment sellers told Nikkei Asia that prices have risen by 20% from last year.

A source at Mitsubishi UFJ Lease & Finance told Nikkei Asia that almost 90% of used machines appeared to be going to China. Another source at a used equipment seller told the publication, “Machines that were basically worthless several years ago are now selling for 100 million yen (~RM3.8 million).”

According to a Bloomberg analysis of official trade data, Chinese businesses acquired nearly US$32 billion (~RM13 billion) of computer chip-making equipment from Japan, South Korea, Taiwan and elsewhere last year – a notable 20% increase from 2019.

For all intents and purposes, China and the US are effectively in a chip-making arms race. The Trump administration enacted sanctions that cut off Chinese manufacturers from US chip-making technology, and President Biden is unlikely to reverse them, for now.

Warning of China’s dominance, US industry groups and politicians are urging the Biden administration to beef up America’s own chip-making capacity. China itself is more determined to ever achieve chip independence after Trump exposed the country’s dependence on US technology.

That hasn’t been going so well. Beijing failed to hit its target of having China produce 40% of the chips it consumes by 2020, the New York Times said. Now, the government has a new target: 70%  by 2025. But last year, China-based companies produced just 5.9% of the chips the country consumed, IC Insights said.