China produced 350 million chips last year, displaying growth amid a global downturn

China Records 6.9% Increase in Microchip Production in 2023

In 2023, China produced 351.4 billion integrated circuit (IC) chips, witnessing a 6.9% increase from the previous year. The positive trend signifies a good achievement during a challenging period. The data was made known by the National Bureau of Statistics of China and is reported by the South China Morning Post.

Underperformance of Major Chip Manufacturers

As a point of comparison, China’s leading contract chip manufacturer, SMIC, generated 84% of its total revenues from the domestic market in the third quarter of 2023. Through the first three quarters of the previous year, the company faced a decrease in equipment usage from 96% to 74%. Consequently, the quantity of processed silicon wafers by SMIC from January to September declined by 24% compared to the same period in the previous year. The company’s full report for Q4 will be published on February 7th this year.

The second-largest chip contract manufacturer in China, HSMC, also witnessed reduced revenues for the first nine months of the previous year. The company experienced a nominal 0.79% decrease in revenues during this period compared to 2022. After facing a production capacity deficit in Q2, the company saw a decrease in production use to 86.8% in Q3. Industry analysts anticipate a sluggish demand in the semiconductor component market in this quarter, with growth expectations not until Q2. TrendForce notes this decrease in production capacity use is a global phenomenon across the entire IC contract manufacturing market. In Q2, contract manufacturers are expected to see an improvement in their product inventory situations.

Decline in Chip Export and Import

Overall in 2023, China exported 267.8 billion IC chips, equivalent to a 1.8% decrease from 2022 in terms of quantity. In terms of value, the decrease was 10.1%, totaling $135.9 billion. IC chip imports also declined last year, representing a 10.8% decrease to 479.5 billion chips in terms of quantity and 15.4% ($349.4 billion) in terms of value. The downward trend can partly be attributed to intensified Western sanctions and China’s pursuit of import substitution in the industry.

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