China is struggling. The crisis it is facing reveals that the Red Giant faces difficult times in what could be called “the perfect storm”: COVID, border closures, industrial standstill, decentralization of factories in its country, an unprecedented real estate crisis, and a global technological blockade. We have another figure from 2023, which arrives in January 2024: China’s chip imports have suffered a drop of -15.4%, which is really serious for the country’s finances.
China is no longer closed to the world, but it now faces extremely poor economic data; in fact, the worst in a decade if we remove the entire virus issue. It is barely avoiding a technical economic recession, but out of the last 6 months, 5 have had negative or zero value, only showing minimal recovery with a +0.1% CPI in August. Therefore, knowing that the sector where more money is being spent is falling is a strong indicator of what lies ahead.
China stops buying $349.4 billion in chips, a -15.4% drop in imports
The registration data were released in 2004, which is exactly 20 years ago when data began to be collected in this sector. The more than $349 billion that China has not imported from abroad represents the lowest figure since such records began. More worryingly, it is the second consecutive year in which imports have declined.
Why is this important? Because it means that, technologically speaking, the country is coming to a standstill. With only one company in the top 25 semiconductor companies worldwide (SMIC) and ranking 24th and falling, China is entering a dangerous spiral.
The slowdown is due to two key factors: firstly, the general decline in chip demand, where only AI stands out as an exception. However, China has blocked AI hardware imports from the West and allied countries, making it increasingly lagging in this area and unable to import tools or chips.
The world gradually separates from China
The decision by Xi Jinping to stop the country, close borders, and keep people in their homes for almost two years left the economy completely stalled. Although it rebounded, since September 2022, the CPI has gradually declined, dragged down by the aforementioned factors.
How does this affect exports? The world increasingly wants to distance itself from China, and although they need it, this will mostly be temporary. Malaysia, Vietnam, and India are taking over the Chinese market, offering lower prices, land for construction and FAB expansion, and increasingly cheap labor with shift schedules to cover 24 hours.
The result of the competition against China? Chip shipment volume declined 10.8% in 2023, marking the second year of decline in these terms and showing that China has lost almost a quarter of semiconductor exports.
We must now pay attention as global chip demand seems to be reactivating, with AI reaching new heights and potentially driving a significant increase in sales, if the economy allows, of course.
The article “China suffers: chip imports fall -15.4%, its worst historical figure” first appeared in El Chapuzas Informático.
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