This fact once led to US sanctions against China due to fears that cutting-edge American technologies could be used as weapons to harm American national security. These restrictions have forced China to purchase obsolete equipment to meet domestic demand for chip products.

Chinese break import record

The new report comes a month after ASML’s second-quarter earnings report showed China was its largest customer for the second quarter in a row.

• In Q1 and Q2 2024, 49% of ASML shipments were to China.
• This is in marked contrast to shipments in 2022 and 2023, when China accounted for 14% and 29% of sales.
• In the third and fourth quarters of 2023, 46 percent and 39 percent of deliveries were made to China.

As of July, China had purchased approximately 26 billion dollarsThis is also a new record. The previous high was in 2021, when the country purchased about $25 billion worth of equipment in the same period. The list of companies selling equipment to China includes the Netherlands’ ASML.

Interestingly, ASML has previously shown its willingness to join the sanctions by blocking technology shipments to China even before the new rules came into effect. It has also expressed its willingness to remotely shut down its machines if China dares to invade Taiwan and take over TSMC factories. But when it comes to older technology, the company is not so picky, as you can tell.

Another company that stands out in the report is American Applied Materials. It had previously faced multiple criminal investigations for evading sanctions against China. Analyst Vijay Rakesh noted that the company’s sales in China also rose sharply, up 102% year-on-year.

Threats are not few

Although China is unable to obtain the state-of-the-art EUV lithography machines needed to produce the most advanced chips, including those used in artificial intelligence computers, the traditional facilities of the past also have the capacity to produce advanced chips using multiple layers stacked on top of each other with masks. If they are not suitable for smartphones because they would be too large, then it won’t matter for a conditional missile or a large AI server.

US sanctions on China have also affected older DUV machines, but these are limited to a few factories.

China is trying to keep up with global chip manufacturing standards amid tightening lockdowns, but its progress is “slowing down,” as the media has noted. Despite the hype surrounding China’s Huawei Ascend 910B AI chip, which is said to be a rival to NVIDIA’s existing A100, media reports have reportedly seen production issues mean that only one in five chips meet the required quality criteria.