Fearing Donald Trump’s sanctions, Chinese AI businesses scramble to stockpile US chips

As tensions between the United States and China over technology continue to mount, Chinese tech companies are rapidly stockpiling American microchips in anticipation of tougher sanctions under the incoming administration of President-elect Donald Trump. This scramble underscores the growing urgency in Beijing to secure critical components for its technology sector amidst geopolitical uncertainty.

Recent customs data reveals that China’s purchases of American semiconductors soared to $1.11 billion in October, a 60 per cent increase compared to the same period last year. Between January and October, chip imports from the US totalled $9.61 billion, reflecting a year-on-year surge of 42.5 per cent. Since June, China’s monthly chip imports have consistently surpassed $1 billion, a clear sign of its strategic efforts to hedge against potential restrictions.

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Key focus on critical AI chips

China’s imports are concentrated on specific types of semiconductors, including CPU-based processors, controllers, and chips for storage and signal amplification. These components are vital for artificial intelligence (AI) development, advanced computing, and other strategic industries that President Xi Jinping has identified as essential to China’s economic resilience and industrial upgrading.

Despite these efforts, Chinese companies face significant challenges in producing advanced chips domestically. Huawei Technologies, for instance, remains reliant on 7-nanometre technology for its upcoming Ascend processors due to restrictions on accessing cutting-edge US lithography machines. This highlights the persistent gap between China’s semiconductor capabilities and global leaders like Taiwan Semiconductor Manufacturing Company (TSMC).

Donald Trump and China's contentious past

Trump’s return to the presidency has reignited concerns in China about expanded sanctions targeting its tech industry. During his first term, Trump aggressively imposed restrictions on Chinese firms, and experts anticipate he will take a similar approach this time. Liang Yan, an economics professor, predicts Trump will focus on denying China access to advanced chipmaking machinery and cutting-edge semiconductors, though the extent of sanctions remains unclear.

Trump has also pledged to convince companies like TSMC to relocate production to the US, potentially reshaping the global semiconductor supply chain. However, China accounts for roughly one-third of global chip demand, creating a dilemma for Trump: sanctions could disrupt this demand, making it harder to sustain expanded US chip production.

Semiconductors at the heart of US-China tech war

The battle for dominance in semiconductor technology, particularly chips smaller than 10 nanometres, has become a critical front in the US-China tech rivalry. Advanced chips power AI systems and cutting-edge computing, making them central to both countries' strategies for technological leadership.

Both the Trump and Biden administrations have taken steps to restrict China’s access to advanced semiconductor technologies. Sweeping export bans introduced under Biden were expanded in 2022 and 2023, targeting AI chips, gaming processors, and lower-tier data centre chips. These restrictions reflect a bipartisan effort to curtail China’s advancements in critical technologies.

As the geopolitical competition intensifies, China’s rush to secure US chips highlights its reliance on foreign technology despite years of efforts to achieve self-sufficiency. The stakes are high, with the outcome of these measures likely to reshape global tech supply chains and influence the balance of power in the rapidly evolving semiconductor industry.