Despite the U.S. governments strict control of semiconductor equipment exports to China two years ago, U.S. semiconductor equipment manufacturers reliance on the Chinese market has not only decreased, but increased.

Government subsidies drive U.S. domestic semiconductor investment

At the three-day Semicon West in San Francisco, U.S. government officials highlighted the achievements of the 2022 Chip and Science Act. The bill aims to boost the development of the U.S. native semiconductor industry through government subsidies. U.S. Department of Commerce Deputy Secretary Laurie Locasio said at the show: “Without the Chip Act, this growth will not occur. We work day and night to get on track in less than two years.” This bill attracted large-scale investment in the U.S. by multi-semiconductor giants including Intel, Samsung Electronics and Taiwan cumulative circuit manufacturing (TSMC).

US Government Subsidy Policy

To boost the development of the semiconductor industry, the U.S. government has decided to provide subsidies totalling $52.7 billion. Thanks to this policy, most semiconductor manufacturers have announced new investment plans in the U.S. For example, Taipei Inc. has significantly increased investment in building a base in Arizona. Semiconductor equipment manufacturers have also gradually benefited from this, as building semiconductor factories is inseparable from the delivery of equipment. Data show that the U.S. Application Materials Company’s share of operating revenue in the U.S. in 2023 is 15%, up 6 percentage points from 2021.

Increase in sales.

Although the U.S. government has strict export controls on China, the dependency of semiconductor equipment manufacturers on China has not decreased as a result. In fact, U.S. Application Materials Company’s share of the Chinese market in its operating revenue in the last quarter has reached 43%, up 22 percentage points from the same period last year. This share of Colin R&D companies has also reached 42%, up 20 percentage points from the same period last year. These data show that despite export controls, the Chinese market is still an important market for these companies.

Increased Exports of Non-Advanced Equipment

The U.S. government restricts exports to China of advanced semiconductor manufacturing equipment, whereas non-avant-the-art equipment is not controlled. Many semiconductor equipment manufacturers have therefore increased exports of these non-avant-the-art equipment. Executives of a large equipment manufacturer said: “If there is no regulation, the proportion of Chinese business should be higher.” This shows that despite the impact of export controls, these manufacturers are still able to maintain a high degree of dependence on the Chinese market through the export of non-avant-the-art equipment.

The future prospect

As the U.S. government continues to push the implementation of the Chip and Science Act, more semiconductor giants are expected to invest in the U.S. to further boost the development of the U.S. domestic semiconductor industry. However, for U.S. semiconductor equipment manufacturers, the Chinese market cannot be overlooked.

In summary, despite strict export controls, the dependence of U.S. semiconductor equipment manufacturers on the Chinese market continues to increase. Government subsidy policies have promoted the development of the domestic semiconductor industry, but the importance of the Chinese market cannot be ignored. In the future, how to continue to promote the development of the domestic industry while balancing the dependence on the Chinese market will be an important issue for U.S. semiconductor equipment manufacturers to face.