China's Semiconductor Industry Prepares for Potential Trump Presidency

By Eduardo Baptista and Fanny Potkin
BEIJING/SINGAPORE (Reuters) – China's semiconductor industry is bracing for four more combative years under Donald Trump as U.S. president. Companies are increasing foreign chipmaking equipment purchases and seeking to hire international talent and form new alliances.

Strategies for the Future

Among the strategies considered are:
– Pursuing closer ties with countries and firms alienated by U.S. policy.
– Doubling down on self-sufficiency based on insights from over 30 articles and research notes from Chinese chip firms, associations, and analysts after Trump's win.

Trump's first term impacted Chinese telecom giants like Huawei and ZTE and the semiconductor company SMIC, placing them on trade blacklists limiting access to U.S. technology. The Biden administration has imposed broad export controls that restrict China's access to advanced chips.

Calls for Aggressiveness

Zhu Jing, deputy secretary-general of the Beijing Semiconductor Industry Association, urged firms to expand internationally. He suggested that opportunities for resuming certain chip imports might arise if global sanction coordination weakens under Trump.

Zhu emphasized the need to attract overseas talent if the Trump administration repeats its previous policies against student and professional migration from China. He expressed optimism for the semiconductor industry's growth in this scenario.

Industry Preparedness

The semiconductor sector is expected to face heightened export controls and tariffs under Trump, underscoring the need for self-sufficiency. Many articles reflected that Trump’s initial administration highlighted the significance of localized production for the semiconductor industry.
Jinan Lujing Semiconductor Co stated, "Trump's first term made us realize… the necessity of localization."

Increased Equipment Imports

China has significantly increased its semiconductor equipment imports, with a reported third increase to $24.12 billion in the first nine months of this year. This includes $7.9 billion spent specifically on lithography machines, essential for producing high-tech chips.

A major portion of these lithography machines was sourced from the Netherlands. However, ASML Holding has halted shipments of advanced machinery to China following new U.S. policies.

To safeguard against potential election repercussions, Chinese companies have maximized semiconductor equipment orders. Nori Chiou, the investment director at White Oak Capital Partners, noted that tech companies are more prepared compared to during previous trade wars and elections.