China Starts Stockpiling Silicon Chips

Trade relations may worsen between the US and China, as Chinese manufacturers start hoarding silicon chips from US manufacturers. Many Chinese firms still buy their silicon chips from US manufacturers. As the Trump administration continues to tighten the screws on the availability of electronics for Chinese manufacturers, there is a risk of a so-called ‘silicon curtain’ cutting China off from this valuable resource.

Chinese Investment not Enough

Before the threat of a trade war between China and the US was even considered, China had started developing its domestic silicon semiconductor industry. However, the industry at current still can’t supply device components such as high-performance graphics chips and CPUs. Most smaller Chinese manufacturers depend heavily on imports from the US market. The US Government’s move to blacklist Huawei has sent a clear signal to these manufacturers that they need to stockpile silicon chips to prepare for a long and protracted trade battle.

The Blacklist is Lengthening

US government officials have added to the blacklist of companies they intend to do business with. Chinese surveillance technology provider Hangzhou Hikvision Digital Technology Co. is one of eight new additions to the list. Their names were added to the list because of their apparent involvement in human rights violations in Xinjiang. The company states that it has managed to stockpile parts anticipating this setback to their business. Other smaller Chinese companies have begun following their lead.

Impacting the Domestic Chinese Market Significantly

While China has invested billions of dollars in developing a local microprocessor industry, parts and machinery still need to be sourced from the US. Fujian Jinhua Integrated Circuit used to be one of China’s fastest-growing new silicon microprocessor manufacturers. After being added to the US blacklist, they ceased to produce chips in March of this year, adding another tech casualty to the trade war. If the current tensions continue, no one is sure how many more companies will fold on the Chinese side of the equation, or how far back those closures will put them in the global tech race.