China has seen a dramatic drop in its imports of semiconductors this year in the 11 months ending Nov. 30.

As reported by South China Morning Post (SCMP), the factors that weigh down the world's largest market for sophisticated chips include production slowdowns, economic hurdles, and a wide-ranging tech war with the United States.

Import Reports

General Administration of Customs statistics issued on Wednesday, Dec. 7, show that imports of integrated circuits (ICs) dipped by 14.4% during those 11 months - from 582.1 billion to 498.5 billion units in the same time the previous year. 

This decline exceeded 13.2% in the first ten months of this year.

However, the overall value of imported ICs only fell by 1.8% to $381.2 billion for the first 11 months of 2022. 

Even though worldwide semiconductor prices have been sliding due to a supply glut and a weakening global economy, China has been purchasing chips at higher prices.

In November, China reported a drop in chip imports of 1.4% month-over-month to 40.5 billion units, from 41.1 billion in October. While it is still a decline, this was better than October's 13.7% drop from September's IC imports.

Meanwhile, China's IC exports maintained their rapid slide, dropping 11.7% year-on-year to 250.5 billion units in the 11 months through November. This was a steeper loss than the 10.8% drop in the first ten months of this year. 

The total value of exports of chips over those 11 months increased by 2.2% annually.

Against the US

The worldwide slump in the semiconductor sector as a chip shortfall turned into a surplus coincided with the rapid decrease in chip imports and new trade restrictions imposed by Washington in early October.

Per the figures issued Monday by the Semiconductor Business Association in Washington, worldwide sales in the chip industry amounted to $46.9 billion in October, down 4.6% from a year earlier.

The US Department of Commerce's Bureau of Industry and Security (BIS) adopted changes on Oct. 7 that limit China's ability to purchase powerful computing chips. The modification also restricts China from creating and operating supercomputers and manufacturing advanced semiconductors for military uses, including mass destruction weapons.

A total of 31 Chinese IT enterprises, research institutions, and other organizations were added to the US Unverified List. The list acts as a trade restriction since entities on it are ineligible to receive products subject to the US government's Export Administration Regulations.

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Local Chip Production

China's primary importation has been semiconductors for many years, outpacing crude oil and bulk commodities. 

On SCMP's report, the first annual decline in chip imports since the start of 2020 was seen in January and February, as per the figures from official customs.

Covid-19 restrictions have delayed China's manufacturing even more in November, as seen by the latest data on plummeting chip imports.

Based on the National Bureau of Statistics (NBS), the official manufacturing purchasing managers' index (PMI) slid to 48 in November from 49.2 in October. 

For the second successive month, the metric dropped below the 50-mark that distinguishes monthly growth from contraction, marking the lowest level since April.

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