Decline in China’s chip output slows in November after record drop

China’s integrated circuit (IC) output in November dropped 15.2 per cent from a year ago, as the country’s semiconductor industry grappled with weak demand and the latest US trade sanctions.

While IC production last month fell to 26 billion units, according to data released by the National Bureau of Statistics (NBS) on Thursday, it marked the slowest year-on-year decline in the past five months.

The country’s IC output plunged 26.7 per cent in October from a year earlier, marking the largest single-month decline since the data became available in 1997, and surpassing the previous record decline of 24.7 per cent in August.

In the first 11 months of 2022, China’s IC output reached 295.8 billion units, down 12 per cent from the same period last year, NBS data showed.

The slower decline in chip output last month came after the country posted a 1.4 per cent month-on-month decline in chip imports to 40.5 billion units, also marking an improvement from October when the numbers tumbled 13.7 per cent from the previous month.

China has been doubling down on its drive to achieve semiconductor self-sufficiency by pledging state support and pumping investments into the domestic industry, in response to escalating US trade restrictions in recent months.

Washington in October expanded the scope of its hi-tech export controls targeting chip makers in mainland China, following the Biden administration’s enactment of the Chips and Science Act in August to boost American production of ICs.

China’s semiconductor industry has received a much-needed lifeline after regulators last month approved nine initial public offering applications from chip-related companies, which were expected to raise an estimated total of 21.6 billion yuan (US$3.1 billion).

However, national chip output in November was still lower than the 27.5 billion units produced in May, and roughly equal to the 25.9 billion units made in April, when an unprecedented two-month Covid-19 lockdown in chip production hub Shanghai stalled manufacturing activities.

The sluggish output reflects the impact of dwindling consumer demand for electronics, as well as the disruptions to factory activities caused by China’s zero-Covid policy, which had yet to be relaxed last month.

The official manufacturing purchasing managers’ index (PMI) fell to 48 in November, down from 49.2 in October, marking the lowest reading since April after remaining below the 50-mark that separates growth from contraction for a second consecutive month. The Caixin/S&P Global manufacturing PMI, a private-sector survey, recorded its fourth monthly contraction in a row in November.

In the third quarter, smartphone shipments fell 11 per cent in China from a year earlier, compared with a 9 per cent decrease globally, while personal computer (PC) shipments in China dropped 13 per cent, according to market research firm Canalys.

Domestic output of microcomputers – a product category that includes PCs, smartphones, video game consoles and other handheld electronics devices – slumped 27.9 per cent in November, according to NBS data. South China Morning Post