China circumvents US chip sanctions with used equipment

It looks like Chinese chip manufacturers are trying to circumvent the US government’s sanctions on technology. The US wants to subject the Chinese semiconductor sector to even stricter restrictions.

For this reason, many chip manufacturers are currently buying so-called wafer fab equipment (WFE) in order to continue production in factories. However, as it has now turned out, some of these transactions violate US sanctions. Here you can find out more about it!

No new tools for Chinese companies

We’re seeing companies like HuaHong, SMIC, and Silan Microelectronics buy everything they can, even used tools. According to a report by DigiTimes, which relies on anonymous industry sources, some WFE components that the companies have obtained cannot be shipped to China because it would violate US sanctions. And that’s exactly why the companies want to keep such purchases secret.

The tech giant Huawei, in particular, is under strict sanctions by the US government and is not even allowed to procure advanced US technologies without approval. But Huawei, of all companies, is investing in the purchase of wafer fabrication equipment, which could mean that the company is preparing to build a factory with SMIC and therefore wants to buy as many tools as possible.

The US sanctions

What do the sanctions mean for Chinese tech companies? Chinese companies have been banned from acquiring tools for making 14nm-class chips and chips using more advanced manufacturing technologies. However, the restrictions only hit the companies lightly, because now only SMIC can produce chips on such highly developed nodes. The US government is working with Japan and the Netherlands to further tighten restrictions, so foundries and manufacturers that produce integrated designs are speeding up their orders. First of all, there are many exports to Russia.

Taiwan manufacturers benefit from sanctions

What kind of wafer fabrication equipment the US government intends to ban for export to China nobody knows at the moment, but that will surely become clear soon. In any case, one consequence of the sanctions is that companies like Nexchip and HuaHong, which specialize in mature manufacturing technologies, are now buying pretty much anything they can get their hands on. For them, buying even used equipment is important if they want to keep their factories running.

In any case, there is one party in this whole affair that is benefiting from the sanctions against Chinese semiconductor manufacturers. According to reports, orders from China for Taiwanese manufacturers of such systems are skyrocketing and will extend into 2025. We will see how the situation will develop in the near future.

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