U.S. Chip Controls Will Kill China Manufacturing

The president of Kyocera, a major producer in the chip supply chain thinks companies will soon stop relying on China to manufacture their products, thanks to new rules from the US, Nicholas Gordon reported for Fortune.

Photo Insert: Workers at an electronics factory in China

"The business model of producing in China and exporting abroad is no longer viable,” Hideo Tanimoto told the Financial Times, but added that manufacturing for the Chinese domestic market would still be possible.

“Obviously with all that’s happening between the US and China, it’s difficult to export from China to some regions,” he added. New regulations are a problem for Japan-based Kyocera, which has 70% market share of the ceramic components in the tools used to make chips.

Tanimoto said the company has slashed its forecast full-year operating profit by 31%.

Last October, the Biden administration imposed tough export controls on China, limiting the sale of advanced chips and chipmaking equipment to the country’s chip industry.

Earlier this year, Japan and the Netherlands—whose companies manufacture the equipment needed for the most advanced chips—are also moving to bar exports of this technology to Chinese companies.

Companies are considering moving manufacturing out of China, in part to diversify their supply chains after Beijing’s COVID-zero policies disrupted manufacturing. Costs are also increasing, with Tanimoto telling the Financial Times that Chinese wages have gone up.

Apple and Foxconn have recently expanded production of consumer electronics in both India and Vietnam. Beijing, for now, has yet to impose retaliatory measures on the US. Officials are considering export controls on advanced technologies used to create advanced solar wafers. China produces 97% of these components.

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