Is China using second hand to circumvent US restrictions?

Is China using second hand to circumvent US restrictions?

The virtual cold war continues. After talking to you about Jian, a Chinese malware that "emulates" code written in the US, let's talk about how Beijing is using the second-hand market to circumvent US restrictions.

Nikkei Asia, English language publication by Nikkei Inc - a publishing house that also owns the Financial Times, reveals that the prices of equipment used for the production of chips have increased by 20% over the last year. The increase would be driven by demand from Chinese semiconductor manufacturers, who buy these equipment because they are not subject to US restrictions imposed in 2020.

Last September, the US imposed further sanctions on SMIC, one of the largest microchip manufacturer in China. The company has also been included in the "Entity List", which prevents it from sourcing US products. But these restrictions, aimed at slowing or blocking chip production in the country, don't include used equipment. For this reason, Japanese companies specializing in second hand have literally sold out their warehouses. According to some retailers, the value of some specialized equipment, such as lithography systems, has tripled.

The Nikkei Asia report underlines that, according to a source from Mitsubishi UFJ Lease & Finance, “[...] about 90 % of used machines go to China ”. Another anonymous source among specialist dealers said that "machines that were worthless several years ago now sell for 100 million yen (more than 770,000 euros, ed.)". "The machines we bring (at Chinese fairs or in Taiwan, ed) are bought and shipped directly to the production plants - said a Sumitomo Mitsui Finance and Leasing official - They disappear in an instant".

How is this equipment used? A small part would appear to be used in production lines, while the majority is accumulated to be eventually used in the future. In both cases they are old machines, which are 20 or even 30 years old. This "rebirth" of used cars is not limited to Japan alone. Bloomberg said Chinese companies bought nearly $ 32 billion worth of chip-making equipment from South Korea, Taiwan and other Asian countries in 2020. The volume of used purchases would have increased by 20% already in 2019, with a constantly rising trend also due to the pandemic and confinement.

The ultimate goal of the People's Republic is self-sufficiency. Chinese companies are trying to implement production lines to no longer rely on US technologies. SMIC itself is working on the development of CPUs, GPUs, memories and other components independently. To do this, it seems that Beijing is also willing to resort to obsolete equipment.

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