US-China Chip War Forces TerraDyne to Withdraw $1B Equipment from China

US-China Chip War Forces TerraDyne to Withdraw $1 Billion Worth of Equipment from China

TerraDyne, a semiconductor testing company, has become the latest casualty of the ongoing US-China chip war. Due to disruptions in the supply chain, TerraDyne was forced to withdraw equipment worth $1 billion from China.

TerraDyne’s Crucial Role in the Chip Industry

TerraDyne plays a vital role in the global chip industry by manufacturing automated testing equipment. However, their operations in China faced significant challenges, leading to the need for urgent measures to sustain their manufacturing activities.

Emergency Approval and Relocation

In order to continue manufacturing in China, TerraDyne had to obtain emergency approval. However, considering the risks involved, the company ultimately decided to relocate their manufacturing facilities outside of China, incurring substantial costs in the process.

Not a Direct Target

TerraDyne clarified that they were not a direct target of regulations regarding equipment supply to China. However, due to their reliance on the Chinese market and disruptions in the supply chain, they had no choice but to make the difficult decision to relocate their manufacturing facilities.

China’s Dependency on Overseas Supply Chains

While China has made progress in developing its domestic semiconductor industry, it still heavily relies on overseas supply chains. Reports emphasize China’s high dependence on US semiconductor equipment suppliers, who currently hold an 80% market share.

Decrease in Semiconductor Equipment Imports

China’s imports of semiconductor equipment have seen a significant decline in recent times. By the end of 2022, imports had decreased by 24.4% compared to the previous quarter, followed by an additional 28.1% decrease in early 2023. This indicates China’s changing strategy and efforts to reduce reliance on foreign suppliers.

China’s Efforts to Reduce Dependency

In 2019, China established a $29 billion fund to reduce reliance on foreign semiconductor equipment. They also introduced new tax deductions as financial incentives to encourage the development of a self-sufficient domestic semiconductor industry.

Emphasis on US Equipment Dependency

The annual conference on China’s semiconductor equipment highlighted the country’s dependence on US equipment. Only 36% of Chinese semiconductor equipment is produced domestically, with lithography equipment being particularly low at 5%.

ASML’s Equipment Blockade

ASML, a leading manufacturer of lithography equipment, faced restrictions in sending their latest equipment to China. This exemplifies the challenges China faces in achieving its goal of reducing dependence on foreign suppliers.

China’s Self-Sufficiency Goal

China aims to have 70% of its domestic industry using locally produced equipment, reflecting its desire for self-sufficiency in the semiconductor industry. However, the current dependence on foreign suppliers poses risks and challenges that need to be addressed.

Implications for TerraDyne and the Industry

TerraDyne’s decision to relocate its manufacturing facilities outside of China highlights the challenges faced by foreign companies operating in the country. The US-China chip war has had a significant impact on the semiconductor industry, affecting various sectors, including the export of semiconductor equipment.

Continued Efforts by China

China’s continuous efforts to reduce dependence on foreign semiconductor equipment have been evident for several years. Their investments and initiatives demonstrate a strong commitment to developing a robust domestic semiconductor industry.

Conclusion

The US-China chip war has had a profound impact on TerraDyne and the semiconductor industry as a whole. Disruptions in the supply chain and China’s efforts to reduce reliance on foreign suppliers have forced companies to make difficult decisions and adapt to a rapidly changing environment.