China sees steep fall in semiconductor output as Covid lockdowns slacken demand

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China witnessed a sharp decline in chip manufacturing in August owing to Covid restrictions and softening demand, according to a report in South China Morning Post.

China’s chip output plummeted 24.7 percent year-on-year to 24.7 billion units in August, the biggest monthly drop since records began in 1997, the report said.

This marked the second consecutive month of contraction for the domestic semiconductor industry, which saw its output shrink 16.6 percent to 27.2 billion units in July, it said.

The report further mentions that as many as 3,470 companies – including entities that use the Chinese word for “chip” in their registered names, brands or operations – deregistered in the January-to-August period.

The production slump in China is coming at a time when US and India make towering efforts to bolster domestic production.

In the United States, the Biden administration published its strategy for subsidizing US output of semiconductors, with the first phase of funding potentially being rolled out next spring.

The plan -- known as Chips for America -- allocates $28 billion for domestic production of leading-edge logic and memory chips, about $10 billion for new capacity to build current-generation chips and semiconductors, and $11 billion for a new National Semiconductor Technology Center, manufacturing institutes, and other development programs.

As part of the plan, the US CHIPS Act prohibits US tech companies that receive federal funding from building new, advanced factories in China for at least 10 years.

On the other hand, India's Vedanta Ltd and Taiwan's Foxconn will invest $19.5 billion to set up semiconductor and display production plants in Gujarat.

The Indian government has announced an ambitious production-linked incentive (PLI) scheme worth Rs 76,000 crore for establishing a semiconductor ecosystem and display manufacturing electronics ecosystem.