The Paradox of US Sanctions Fostering China's Technological Self-Reliance: China Increases Semiconductor Production Through Domestic Technology Development

Since 2022, the US has been implementing export controls on semiconductors to China and has been expanding the intensity and scope of its pressure on China. In May of this year, the US announced plans to increase tariffs on legacy (older) semiconductors from 25% to 50%, and it is also considering additional sanctions on cutting-edge semiconductor technologies such as GAA (Gate-All-Around) and HBM (High Bandwidth Memory). However, some experts believe that the US sanctions are leading to a "sanctions paradox" that is actually accelerating China's technological self-reliance.

Jeon Byeong-seo, head of the China Economy and Finance Research Institute, pointed out that "we need to pay attention to the fact that China's semiconductor exports have started to increase not only in value but also in quantity since the end of last year." After the end of 2022, the US withdrew all engineers involved in repairing semiconductor equipment from China. This temporarily hampered the normal operation of semiconductor production facilities in China. However, the recent increase in semiconductor production suggests that semiconductor factories in China are now operating normally. Jeon explained, "In the past, China relied on US engineers' technology, but now it appears to have acquired the ability to install equipment independently."

There are also concerns that advanced semiconductors are being channeled to China through third countries despite US sanctions. In August 2022, the US banned the export of high-performance artificial intelligence (AI) semiconductors such as Nvidia's A100 and H100, but China is reportedly obtaining advanced semiconductors through roundabout methods such as the smuggling market. Recently, the Hong Kong media outlet South China Morning Post (SCMP) reported that "the market for smuggling Nvidia's A100 and H100 AI chips into China is rapidly expanding." Oh Jeong-hyeok, a senior researcher at the Korea Institute for International Economic Policy, analyzed that "Chinese companies have secured numerous unofficial routes to acquire advanced AI chips, including lease agreements with external cloud server companies and purchases through subsidiaries."

There are also criticisms that the recent measures taken by the US, such as the tariff increase, lack effectiveness. This is because the tariff increase on general-purpose semiconductors will not take effect until after the US presidential election in 2025, and it is merely an executive order that the government can reverse at any time.