The United States and China entered a phase of a trade conflict several years ago, which is gradually becoming more and more widespread. In particular, the States are constantly introducing new sanctions, imposing them on the electronic industry of the Middle Kingdom. Well, China, in turn, is trying in one way or another to solve the problems that arise.
Recently, the US has dealt with the issue of reducing the supply of equipment for DUV lithography to China. Now there is a ban on the supply of entire installations for EUV lithography. But the States are trying to get a ban on the supply of any ASML lithography equipment to this country. And now another problem has arisen – a decrease in the number of consumers of products manufactured by Chinese companies. Among those who refuse semiconductor components and systems from China are Dell, HP and probably some other companies. Details are under the cut.
What is going on?
The fact is that Dell, which, for a moment, is the world’s third largest supplier of PCs in terms of shipments to customers, announced the rejection of Chinese components and semiconductor components in its products. This is reported by Nikkei Asia Review, considering the issue resolved. Dell management announced a complete rejection of the use of chips from factories located in China in their devices. By the way, the solution will be implemented within just one year – by 2024 Dell will use components from suppliers not from China.
The root cause of this is trade sanctions, but the company itself is not a supporter or opponent of China. The rejection of details from the Middle Kingdom is only an attempt to debug new logistics supply chains that will not be threatened by the sanctions mechanism. The problem for a company of this magnitude is that if the United States suddenly imposes a complete ban on working with Chinese companies, then it will not be possible to quickly rebuild the business. This will take months, and suppliers from other countries will become unusually in demand, so that the competition for cooperation with them will unfold in earnest. And if you start the debugging process now, then Dell can complete the entire internal restructuring before the start of possible “global Chinese sanctions”.
The proof that Dell’s unwillingness to “annoy” China is the transfer of supply chains is the refusal to work with foreign companies (ie not Chinese), whose factories are located in China. The problem is that if the trade war deepens, then foreign factories in China will also become “untouchable”, until they are transferred to other countries.
At the same time, it is worth remembering that some foreign chip manufacturers are transferring their production to other countries from China, gradually increasing production volumes. One of the countries that willingly welcomes “fugitives” is Vietnam – it is possible that Dell will establish relations with the local headquarters of semiconductor suppliers.
Not only Dell
This is only the first call, so to speak. Already, according to experts from the Nikkei Asia Review, another large company, HP Inc., is also looking to change the direction of supply chains. The company has not yet officially announced its intentions, but, as you know, there is no smoke without fire.
In addition, even earlier, Apple Corporation began to refuse to work with China. In particular, she abandoned her previously announced plans to arrange the delivery of memory chips for her devices together with the Chinese company YMTC. Now it is one of the largest manufacturers of such chips, but the sanctions affect YMTC’s business, and very seriously.
In general, instead of the products of companies from the Celestial Empire, Apple is going to use chips from Samsung Corporation. Now Apple is also looking for an opportunity to establish part of the supply chains in Vietnam – with companies that operate in this country. So, in 2023, mass production of MacBooks will be launched here.
Tech corporations obviously know what they’re doing. For example, due to sanctions for one of the largest suppliers of memory chips in China and the world, Yangtze Memory Technologies Co. (we mentioned it above), difficult times have come. The fact is that four companies refused to cooperate with it at once – three from the USA, these are Applied Materials, KLA and Lam Research, plus the Dutch ASML. They may be able to continue to supply the technology needed by YMTC, but only with the filing of the Bureau of Industry and Security (BIS) of the US Department of Commerce – a special license will be required. Thus, all new partners refuse to work with companies from the Middle Kingdom – and not only buyers of Chinese products, but, as we see, suppliers of technologies that are extremely important for any manufacturer of semiconductor elements.
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What can be expected?
Probably deepening sanctions. So, now the ban on the cooperation of Western technology companies applies to 28 Chinese companies. All this is done for “national security reasons.” A very streamlined wording, under which, if desired, many things fall. Among the lucky companies are ChangXin Memory Technologies, as well as Semiconductor Manufacturing International, Megvii Technology, Dahua Technology and IFLYTEK, Sunway Microelectronics, Yitu Technologies. In general, the largest manufacturers of semiconductor components in the Chinese market and beyond.
Until now, US sanctions have only stimulated the more active development of China’s own semiconductor industry. But what will happen now – one can only guess. It is likely that this year will be critical for the US-China trade war and understanding how everything can end.