China's chip imports see biggest drop in 2022 with accelerated decline in October amid US restrictions and weak demand

China's chip imports shrank by more than 13 per cent this year through October, according to Chinese customs data, as an escalating tech war with the US and economic slowdown weighed on the world's biggest semiconductor market.

For the first 10 months of the year, China imported 458 billion integrated circuits (IC), a 13.2 per cent decline from the 527.9 billion units imported in the same period last year, according to data released by the General Administration of Customs on Monday. It marked an accelerated decline from the first nine months, when imports were down 12.8 per cent.

The reduced volume is also a reversal over 2021, when IC imports jumped 21.3 per cent year on year in the same 10-month period.

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Despite the lower volume, higher chip prices pushed up the value of chip imports for the period by 1.3 per cent to US$351.2 billion.

Chips have long been China's biggest import, having surpassed crude oil and bulk commodities years ago. However, chip imports started to shrink at the beginning of the year, with numbers for January and February marking the first year-on-year drop since the beginning of 2020, according to official customs data.

The month-on-month decline for October was 13.7 per cent, with China importing 41.1 billion IC units. That was down from the 47.6 billion units imported in September, a slight rebound from the previous month.

The accelerated decline in volume has come amid fresh import controls from Washington in early October and coincides with a global downturn in the semiconductor industry as it moves from contending with a chip shortage to a glut.

On October 7, the Bureau of Industry and Security, an agency under the US Commerce Department, released a series of export controls targeting China's advanced semiconductor manufacturing sector, adding new licensing requirements for personnel and equipment that support the production of logic chips and memory chips at foundries in the country.

In September, global sales of semiconductors declined 3 per cent from a year earlier, according to data from the Washington-based Semiconductor Industry Association, as inflation and interest rate hikes led to declining demand for electronic products.

As the industry braces for an industry slump, China's IC exports have also been declining, falling 10.8 per cent to 230.4 billion units in the first 10 months from 258.2 billion in the same period last year. The value of the exports rose 6.2 per cent year on year.

The data is also in line with China's factory activity in October, as coronavirus disruptions worsened and export orders remained under pressure.

The official manufacturing purchasing managers' index (PMI) fell to 49.2 in October, down from 50.1 in September, according to the National Bureau of Statistics. The Caixin/S&P Global manufacturing PMI, a private-sector survey, also stood at 49.2 in October, below the 50-point mark that separates growth from contraction.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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