The impact of the US-China chip ban on third parties

Since 2020, US administrations of both parties have implemented bans on chip and semiconductor manufacturing equipment to China. Since then, US chip exports to China have declined by 22% to 36%. Did these measures have the desired effect of slowing down China’s rise as a supplier of semiconductors? Of course not. It just redirected profits of US companies to other countries.

One of the most telling charts in a study by the European Commission on the impact of US export bans is shown below. Despite the successive trade bans, China’s market share in the global semiconductor industry rose by 18% between 2017 and 2023.

US policies and chip production in China

Of course, the main goal of the sanctions was to prevent China from acquiring the most advanced chip technology, but as I have discussed before, that didn’t work either. Only 11 months after the sanctions of the CHIPS and Science Act came into place in 2022, Huawei presented a mobile phone with the very technology the sanctions should have prevented them from getting.

So, US companies exported fewer chips and equipment to China, but China built more chips. Who then supplied the equipment to China? Pretty much everyone else. The chart below shows that in reaction to US sanctions, China imported semiconductors and semiconductor equipment from the EU, Japan, and Singapore. South Korea and Malaysia also saw additional exports to China, but the growth was not statistically significant. Meanwhile, only Taiwan saw its exports to China drop in line with the US.

As a European, I would like to thank the US government for supporting our local semiconductor industry…

Export substitution to China