China’s semiconductor manufacturing sees biggest decline on record in August

In short: China’s semiconductor industry continues to suffer from the effects of tough Covid policies, a troubled economy and US sanctions. In August, the country saw its biggest monthly drop in integrated circuit production, marking the second consecutive month of decline in the sector.

South China Morning Post reports that integrated circuit output fell 24.7% year-on-year to 24.7 billion units in August, the biggest monthly drop recorded since records began in 1997. Production was the lowest on record since October 2020.

This is the second month in a row that Chinese chip production has fallen; in July it fell by 16.6% to 27.2 billion units. There was a slight recovery in May and June as lockdowns were eased in Shanghai, where many assembly plants are located.

The SCMP writes that the decline could be due to new outbreaks of the coronavirus coupled with China’s anti-coronavirus policies, as well as consumer spending cuts, power shortages caused by localized heatwaves and the global economic slowdown. But US sanctions are likely to be a significant factor.

Related Reading: US-China Semiconductor Battle: Second and Third Tier Implications

Last week, the Biden administration imposed further restrictions on technology exports to China to prevent the country from “obtaining advanced computing chips, developing and maintaining supercomputers, and manufacturing advanced semiconductors,” which the White House says are used to make military systems. including weapons of mass destruction. The Chinese newspaper Global Times warned that the move would have dire consequences for the US.

Earlier, the US introduced new export regulations that prevented Nvidia and AMD from selling high-end accelerators to China and Russia. The administration also has its own list of organizations where Huawei is the most famous name it contains. The Chinese tech giant has been hit hard since its takeover.

The Post notes that a record 3,470 companies in China, including those using the Chinese word “chip” in their registered names, brands or operations, went out of business in the first eight months of the year. With the impact of the latest U.S. restrictions yet to be felt, the country’s tech industry is likely to face even more trouble.