US chip equipment suppliers are shifting their business from China

US chip equipment suppliers are shifting their business from China to Southeast Asia

The American companies Applied Materials, Lam Research and KLA together control about 35% of the world market for chip-making equipment. Because of this, they were forced to be among the first to react to the tightening of US export controls on China in early October last year. They had to relocate non-Chinese personnel to Singapore and Malaysia and increase production capacity in other Southeast Asian countries.

    Image Source: Applied Materials

Image Source: Applied Materials

Under the new conditions as explained Nikkei Asian ReviewAmerican outfitters can no longer serve the Chinese market as usual. Non-Chinese employees who had previously worked in that country were offered a transfer to the United States or one of the Southeast Asian countries. As you know, in October, US sanctions banned companies using US-origin technology from providing service and consulting services to Chinese customers using US-citizen specialists. According to sources, Applied Materials, Lam Research and KLA have maintained their presence in the Chinese market.

However, the business of US lithography equipment suppliers suffered from the tightening of sanctions in October last year. While shipping products to China previously accounted for an average of 30% of their revenue, recent quarterly reports showed that at Applied Materials, that share has been reduced to 20%, while Lam Research and KLA settled for 24% and 23%, respectively. and Lam Research, respectively, had to announce the layoff of 1,300 permanent employees and 700 temporary workers at the end of January, which corresponds to approximately 7% of the total workforce. Of course, the general situation in the global semiconductor market pushed them to this decision, but the US sanctions have probably aggravated the supplier’s situation. Temporary workers in Taiwan also had to be cut.

KLA is now wondering which of the regional markets to focus on once China is no longer the engine of the business due to the implementation of US sanctions. One of the representatives of the Japanese semiconductor industry noted that Chinese companies will inevitably set up independent production of equipment, which will reduce demand for imported solutions.

Singapore and Malaysia have been a popular migration destination for American electronics and lithography equipment manufacturers since the 1960s. Therefore, relocating personnel out of China does not mean going “open field” in terms of infrastructure. For example, Applied Materials is celebrating its 30th anniversary in Singapore at the end of the decade.

According to experts from Isaiah Research, the progress of Chinese companies in the semiconductor industry will slow down in the next three or five years, but the country’s authorities will not stop funding the industry, thanks to which it will sooner or later acquire the long-awaited self-sufficiency. Representatives from Lam Research explained that the geographic proximity to the main sales markets is part of the company’s strategy, with branches in Malaysia, South Korea and India. Applied Materials, which has been present in China since 1984, emphasized its desire to keep a large team of technical support specialists in the country, but did not comment on the situation with their relocation outside of China.

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Dylan Harris

Dylan Harris is fascinated by tests and reviews of computer hardware.

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