"Performance Soars" Chinese Semiconductor Equipment Companies Also Gain from US Sanctions Spillover Benefits

[China Finding Loopholes in US Sanctions]②
Significant Improvement in Net Profit Builds Investment Capacity

As U.S. technology sanctions push Chinese semiconductor companies to turn to domestic equipment manufacturers, the related industry’s performance is improving. As a result, a virtuous cycle environment has been created where internal supply and demand are solid, promoting active investment and technological development.

A representative company is Beifang Huachang, a producer of etching process equipment that creates semiconductor structural patterns. According to the company’s financial report, its net profit in the first half of the year was 1.799 billion yuan (approximately 328.4 billion KRW), a 138.43% increase compared to the first half of last year. Revenue rose 54.79% during the same period to 8.427 billion yuan.

China’s largest semiconductor plasma etching equipment company, Zhongwei Semiconductor (AMEC), is also showing a similar trend. Its first-half revenue was 2.527 billion yuan, up 28.13% year-on-year, and net profit surged 114.4% to 1.03 billion yuan. Founded in 2004, the company recently stated that due to increased domestic demand, a sharp expansion of its market share is expected.

The background to these companies’ strong performance lies in U.S. sanctions. Since October last year, the U.S. began regulating exports to China of equipment capable of producing system semiconductors below 14nm (nanometers; 1nm is one billionth of a meter), DRAM below 18nm, and NAND with 128 layers or more. In December of the same year, 36 Chinese companies, including the state-owned semiconductor firm Yangtze Memory Technologies Co. (YMTC), were designated as export control targets.

Following the intensified U.S. pressure, American equipment companies withdrew their staff dispatched to YMTC and ceased installing new equipment or managing existing equipment. As a result, equipment imports decreased, and China had to respond as much as possible with internal personnel and technology. According to the Semiconductor Equipment and Materials International (SEMI) last month, semiconductor equipment imported into China in the first quarter (January to March) of this year fell 23% compared to the same period last year. It appears that Chinese semiconductor factories, unable to procure equipment from overseas, have begun turning to domestic companies.

However, there is also analysis that the growth of the related market will be limited due to China’s sluggish domestic demand. In particular, major foreign media recently forecast that considering China’s economic downturn trend, the pace at which China surpasses the U.S. economy will be slower than expected. Bloomberg Economics predicted that China will only surpass the U.S. gross domestic product (GDP) in the mid-2040s, delaying the previous forecast of the early 2030s by about ten years. Furthermore, even when the overtaking point arrives, China will surpass the U.S. by a narrow margin and is expected to fall behind the U.S. GDP again in the near future.

China’s economic downturn and the resulting decline in influence are expected to affect cooperation among major countries. Bloomberg recently reported that the U.S. and the Group of Seven (G7) are expanding the influence of Western countries in the international community while assessing the ripple effects of China’s economic slowdown.

This content was produced with the assistance of AI translation services.