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US chip law part of 'commercial Cold War'

By Alessandro Golombiewski Teixeira | China Daily Global | Updated: 2022-09-02 09:21
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The attempt by the United States government to suppress China's semiconductor industry has reached an unprecedented level.

In August, US President Joe Biden signed into law the CHIPS and Science Act, which will provide up to $52.7 billion in government subsidies to the US semiconductor industry. It includes provisions preventing recipients of federal funding from building advanced semiconductor production facilities in countries that present a "national security concern", including China.

In this sense, the US is starting a competition with China to lead the development, production and distribution of semiconductors, urging other countries to choose between the US and China in the semiconductor sector. Some observers have called this a "commercial Cold War".

For decades, the US has been a leader in the semiconductor industry, controlling around half the market share in terms of revenue. According to IC Insights, which provides market research analysis for the semiconductor industry, eight of the 15 largest semiconductor companies in the world are in the US.

However, China's rapid progress and strategic determination in this field have made the US feel uneasy and alarmed. At least in the chip design segment, China has made huge strides in recent years.

In the face of China's rapid development in the semiconductor industry, the Biden administration seeks to secure an absolute leading role in the advanced semiconductor industry by forming an alliance among US companies and key companies in China's Taiwan province as well as the Republic of Korea and Japan. The "Chip 4" alliance, as it is known, is aimed at countering the Chinese mainland's growing influence in global supply chains.

The US companies are the leading players in designing the most advanced chips, while Japan is able to supply key materials and equipment. The ROK and China's Taiwan have mastered some of the most advanced manufacturing technologies.

Once the Chip 4 alliance is established and operates in line with the US vision, direct negative impacts on China will be inevitable.

First of all, the semiconductor manufacturing plants of the ROK and Taiwan on the Chinese mainland will face a dilemma. And a more long-term and comprehensive technical blockade will also make China experience unprecedented challenges in the development of the advanced semiconductor industry. This could destabilize the global semiconductor supply chain.

China needs to use its consumer market size and manufacturing advantages to hedge against the negative effects of the US chip strategy. The way forward for China to truly break through the US blockade is to cooperate with developing countries that also need to be part of the fourth industrial revolution and that are being completely frozen out by the US-led zero-sum game with China in the semiconductor sector.

China can continue to develop the chip industrial chain through hard work and large investments and by occupying a pivotal position by leading developing countries to share the industrial dividends. At the same time, it is necessary to design industrial and innovation policies to ensure that public investment enters high-risk, cutting-edge research fields.

The author is former minister of tourism of Brazil and a professor of public policy at the School of Public Policy and Management at Tsinghua University. The views do not necessarily reflect those of China Daily.

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