Report: China’s Buying Used Chip-Making Equipment to Skirt US Restrictions

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Tensions between the U.S. and China have proved lucrative for some Japanese companies. Nikkei Asia today reported that prices for used chip-making equipment, which aren’t subject to U.S. restrictions imposed in 2020, have risen 20% on average as a result of increased demand from Chinese semiconductor manufacturers.

The U.S. imposed new sanctions on SMIC, the largest semiconductor manufacturer in China, in September 2020 to prevent it from purchasing new chip-making equipment. It also added the company to the Entity List in December 2020 to make it even harder for other businesses to supply it with American-developed technology.

Used chip-making equipment sellers in Japan aren’t subject to those same restrictions. Nikkei Asia said those sellers have struggled to keep their products in stock, which has led to significant price increases over the last year. The value of critical equipment such as lithography systems reportedly tripled in that timeframe.

Nikkei Asia said that “nearly 90% of used machines appear to be headed to China,” per a source at Mitsubishi UFJ Lease & Finance, and that another anonymous source at an unidentified used equipment dealer claimed, “machines that were basically worthless several years ago are now selling for 100 million yen [$940,000].”

Some of that equipment is being used on production lines, but Nikkei Asia said that some of it‘s merely being hoarded just in case it could prove useful in the future. It doesn’t make a difference to the companies selling that equipment; they’re making significant profits and selling through stock they otherwise would’ve sat on.

That isn’t just true of Japanese companies. Bloomberg reported earlier this month that “Chinese businesses bought almost $32 billion of equipment used to produce computer chips from Japan, South Korea, Taiwan and elsewhere” in 2020. That was “a 20% jump from 2019,” according to the report, and that growth could continue.

The end goal for China is self-sufficiency. Companies in the country have made progress on their own chip-making equipment so they won’t have to rely on American technologies, for example, and SMIC has sought other ways to reduce the U.S. blacklisting’s effect on its ability to advance the Chinese semiconductor industry.

China’s also worked to develop its own CPUs, GPUs, memory, and other components so it won’t have to rely on Western products. But until it can replace American chip-making equipment entirely, assuming the U.S. won’t budge on its restrictions, the country’s going to have to continue to stockpile these once-outdated machines.

Nathaniel Mott
Freelance News & Features Writer

Nathaniel Mott is a freelance news and features writer for Tom's Hardware US, covering breaking news, security, and the silliest aspects of the tech industry.

  • Phaaze88
    Insert Somethingsomething song about 'can't stop me now', and 'I'm on the highway to hell self-sufficiency'...

    It might take a little longer, but China will definitely get there. As for what happens after that is best left on a cliffhanger without getting too deep in politics.
    Reply
  • Gurg
    It used to be when US semiconductor mfg. technologically obsoleted equipment it was resold used to the Taiwanese. Things have now changed and the Taiwanese are buying and developing leading edge semiconductors.

    ChiComs are now following the same track of buying used to develop their own internal computer technology.
    Reply
  • MarsISwaiting
    Just leave China alone .. people never read history. what the west did to china was alot more damaging than stealing some technology . actually If you read about the Opium wars and the chinese labors who built the Railways in USA , and how the west was responsible for the spread of Communism in China as a reaction against the western injustice against china , you will feel ashamed. Just leave them alone.
    Reply
  • watzupken
    I think while they can buy used equipments, I am not sure if they can easily get parts to service these equipments.
    Reply
  • Endymio
    MarsISwaiting said:
    Just leave China alone ... what the west did to china was alot more damaging than stealing some technology . actually If you read about the Opium wars and the chinese labors who built the Railways in USA ... you will feel ashamed. Just leave them alone.
    Past injustices never justify present-day crimes. When China steals technology from a firm and/or employs illegal trade practices against it, the owners and employees of that firm suffer. Several companies have been bankrupted, their owners wiped out financially, and their employees left unemployed.

    watzupken said:
    I think while they can buy used equipments, I am not sure if they can easily get parts to service these equipments.
    The primary intent is to reverse-engineer the equipment, and to begin manufacturing their own.
    Reply
  • Phaaze88
    Endymio said:
    The primary intent is to reverse-engineer the equipment, and to begin manufacturing their own.
    Ok, that makes sense - they'll be able to maintain it themselves and improve upon it over time.
    Reply
  • pache11
    Endymio said:
    Past injustices never justify present-day crimes. When China steals technology from a firm and/or employs illegal trade practices against it, the owners and employees of that firm suffer. Several companies have been bankrupted, their owners wiped out financially, and their employees left unemployed.

    The primary intent is to reverse-engineer the equipment, and to begin manufacturing their own.

    I also like the selective history. Think what would have happened to China if Japan won the Pacific war. The 'East' was much more harmful to China then the west in its wildest aspiration.
    Reply
  • Gurg
    Actually a large fab will have multiples ( 5-7 or more) of the same piece/model of equipment so when you move to a smaller shrink you will sequentially replace all that shrink series/size. The new equipment will be used to make the existing shrink size until all the necessary new equipment is in place to produce the smaller size. The product coming out using the new equipment on the old shrink size will be at tighter tolerances, thus higher yields and better performance which is why Intel can now offer higher performance 10900ks series CPUs on 14nm before switching to 10nm or lower.

    ChiComs are large purchasers so they will buy the same series/model equipment from more than one fab around the world thus they will have spares for parts. If it was possible to re-engineer or calibrate the old equipment for the next shrink it would not have been sold.

    As we all know performance improvements with smaller shrinks are incremental, so if the ChiComs purchase used equipment suitable for say 14nm, they can produce product still technologically competitive with 10nm or less but at a much more competitive price for sale/use in China, in the third world or inclusion in finished products.
    Reply
  • ginthegit
    MarsISwaiting said:
    Just leave China alone .. people never read history. what the west did to china was alot more damaging than stealing some technology . actually If you read about the Opium wars and the chinese labors who built the Railways in USA , and how the west was responsible for the spread of Communism in China as a reaction against the western injustice against china , you will feel ashamed. Just leave them alone.

    China has a lot to answer for in both Medieval and ancient history. Mongolians are worse, the Mongolian invasion (making up portions of China) were merciless.
    China is flouting laws now left right and centre, and though we cannot point fingers at the Chinese Public, the communist leadership is despicable.
    Reply
  • ginthegit
    Gurg said:
    Actually a large fab will have multiples ( 5-7 or more) of the same piece/model of equipment so when you move to a smaller shrink you will sequentially replace all that shrink series/size. The new equipment will be used to make the existing shrink size until all the necessary new equipment is in place to produce the smaller size. The product coming out using the new equipment on the old shrink size will be at tighter tolerances, thus higher yields and better performance which is why Intel can now offer higher performance 10900ks series CPUs on 14nm before switching to 10nm or lower.

    ChiComs are large purchasers so they will buy the same series/model equipment from more than one fab around the world thus they will have spares for parts. If it was possible to re-engineer or calibrate the old equipment for the next shrink it would not have been sold.

    As we all know performance improvements with smaller shrinks are incremental, so if the ChiComs purchase used equipment suitable for say 14nm, they can produce product still technologically competitive with 10nm or less but at a much more competitive price for sale/use in China, in the third world or inclusion in finished products.

    When the Chinese systems are fabricating in their plants, only 2 parts of that 10 stage system needs changing in a die shrink, it being the ASICS and the Ultraviolet Lasers that mark and cut. and the Laser element is really a recalibration of equipment more than a replacement. Sometimes armatures need new gear systems, but like most electronics, the Fab plants are Modular, and only 1 or 2 parts of the fab system needs to be changed.
    Reply