Opinion | Is China a sucker for spending billions on foreign semiconductor equipment?

Stockpiling semiconductors is one thing, but stockpiling the complex, high-priced machinery that makes them, is another – and comes with risks

Chips not only require secret ingredients – chemicals, gases, and even lightwaves – but also highly skilled people who understand how to make the ‘recipes’

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Employees work on a lithography machine at ASML in the Netherlands. While in-house technical personnel can be trained in the basic operation of semiconductor manufacturing equipment, chip makers will always need on-site support. Photo: Bloomberg

Published: 10:39am, 8 Feb 2021Updated: 10:44am, 8 Feb 2021

After reading a report last week that said China was stockpiling chip-making equipment to protect against future US trade sanctions, I was reminded of two old proverbs: “There’s a sucker born every minute” and “laughing all the way to the bank”.

Last year, Chinese companies spent almost US$32 billion buying such equipment from suppliers in Japan, South Korea, Taiwan and elsewhere, a 20 per cent jump from 2019, according to a Bloomberg analysis of official trade data.

Separately, trade group SEMI forecast that total chip equipment sales by original equipment manufacturers (OEMs) to China reached US$18.1 billion last year, up from US$13.4 billion in 2019.

Stockpiling semiconductors is one thing, but stockpiling the complex, high-priced machinery that makes them, is another – and comes with risks.

This can only end badly for both sides.

While it might make sense to stockpile machinery used to manufacture, say, smartphones or laptops, the approach won’t work for wafer fabrication gear that can cost several tens of millions of dollars apiece.