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Hong Kong recorded a spike in imports from major chip-making nations in July, suggesting that semiconductor-related goods may be being re-exported to mainland China to avoid U.S. trade restrictions, analysts said.
Washington has stepped up sanctions to limit China's access to the tiny electronic devices that power the modern economy, while encouraging American firms to diversify hi-tech supply chains.
According to figures released on Tuesday by the city's Census and Statistics Department, imports from Taiwan rose by 20.5% to just over HK$50 billion (US$6.4 billion) in July, year-on-year, while imports from South Korea rose by 34.4% to HK$20.4 billion (US$2.6 billion) over the same period.
The recent rise in South Korean exports has been fueled by "strong global demand for semiconductors," Yonhap news agency reported, citing government figures.
Overall, chip exports surged by 85.7% to US$3.39 billion during the 10 days of July, the agency said, adding that semiconductor exports accounted for 19.1% of the country's total exports during that period, fueled by an industry cycle upturn.
Shipments to Hong Kong more than tripled to $791 million, and exports to Japan rose by 31.7% to $752 million, according to Yonhap.
"Growth momentum for exports is expected to continue on the back of solid demand for semiconductors and other IT products in July despite such seasonal factors as summer vacation," it quoted an industry ministry official as saying.
Meanwhile, Taiwan government trade data indicates that some 75% of high-end products exported to Hong Kong are integrated circuits.
Shih Chien-yu of Taiwan's Institute for National Defense and Security Research said imports of both semiconductors and AI servers could be driving the surge in Hong Kong imports in July, because the high unit price of AI servers would easily cause a spike in import figures.
He said that such equipment could easily be re-exported to mainland China, and to Russia, evading a slew of U.S. sanctions.
"It's not just China that needs these things – Russia is also looking to import them via Hong Kong," Shih told RFA Cantonese in a recent interview. "It's impossible for Russia to obtain AI servers elsewhere, or chips used for AI."
"China can't buy them, and don't have any of their own, so they want to buy them on the black market, via Hong Kong," he said.
Chu Yueh-chung, assistant professor of finance at the Southern Taiwan University of Science and Technology, said he doesn't believe there is enough demand in the Hong Kong economy to justify such a rise in imports from Taiwan and South Korea.
"The likelihood that these goods are being re-exported from Hong Kong to mainland China is very, very high," Chu told RFA Cantonese. "The key issue is of course semiconductor-related goods, especially now that the United States is looking to place further controls on China."
"It's not just chips – high-transmission products like High Bandwidth Memory could soon fall within the scope of sanctions, so they are likely importing such products to China via this channel," he said.
In addition to high-tech export bans to China and Russia, Washington also unveiled export controls in October 2022 banning U.S. citizens and permanent residents from supporting the "development or production" of chips in China.
The rules are expected to affect hundreds of Chinese Americans, according to Nikkei Asia, including executives of some of China’s biggest chipmakers, many of whom worked for decades in the United States before returning to China under its “Thousand Talents” program.
Translated with additional reporting by Luisetta Mudie.