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US ChipMakers Warn Biden’s Semiconductor Spat With China Could Backfire

A visitor walks past the stand of American multinational corporation Qualcomm at the Mobile World Congress (MWC), the telecom industry’s biggest annual gathering, in Barcelona on March 2, 2023.InternationalIndiaAfricaEarlier, representatives of America’s largest chipmakers, such as Qualcomm, Nvidia and Intel, had advised the Biden administration to press pause on new measures to block China’s access to high-end microchips, warning of the potential detriment they were fraught with for the US itself.As the Biden administration pushes on with efforts to curb China’s technological progress with new restrictions, America’s semiconductor giants are signaling the alarm, warning that the US may be shooting itself in the foot, according to a media report.Amid the semiconductor trade spat with Beijing that Washington launched last year with a plethora of restrictions, and fueled further with new attacks across the past months, America’s semiconductor companies have responded with the unabashed warning that such poorly-thought out moves could eviscerate their own businesses. Furthermore, slashing sales to China could wreck the Biden administration’s ambitious plans of building new semiconductor factories on US soil, as per the report, citing scored of industry interviews.Three global giants in the chip-making industry – Nvidia, Intel and Qualcomm – have reportedly been meeting with officials in the Biden administration, such as Secretary of State Antony J. Blinken and Commerce Secretary Gina M. Raimondo, along with representatives of an array of think tanks to press the case for reconsidering additional chip restrictions regarding China.

China accounts for close to a third of the global semiconductor market, and over $50 billion in combined annual revenue for Intel, Nvidia, and Qualcomm.

No wonder the leaders of these companies have been pointing out that loss of revenue on such a scale could prompt inevitable cuts in both jobs, spending, and technology development, affecting US semiconductor hubs in located in Ohio, New York, and Arizona.The CEO’s of these companies have warned that Washington’s attacks on Beijing could result in China speeding up creation of its own independent chip industry. Thus, they claimed, America’s ill-conceived semiconductor trade war would result Chinese-created chips dominating on a global scale.

“What you risk is spurring the development of an ecosystem that’s led by competitors… And that can have a very negative effect on the US leadership in semiconductors, advanced technology and AI,” Tim Teter, Nvidia’s general counsel, was cited as saying.

The lobbying by these chip giants has brought results, according to cited sources, resulting in both a delay to issuing of new restrictions, and a reportedly “narrowed list” of further changes that the Biden administration might potentially embark upon.AnalysisAdvanced Microchips Should Be ‘Shared Endeavor’ to Fight Global Warming, Not Target of US-China Feud3 August, 21:24 GMTAfter last year’s restrictions stemming from the CHIPS Act signed by Joe Biden, the American companies cited above has sought to “adjust” their businesses, revealed the report. Thus, Nvidia was forced to come up with a new version of its AI chip, the H100, specifically tailored for China. To ensure compliance with US restrictions, that chip’s performance power was “lowered below the maximum levels allowed,” said the report. Nevertheless, the losses grew and when chatter of impending new restrictions surfaced this summer, the CEOs ostensibly set off on more lobbying to Washington. Intel’s Patrick Gelsinger, Nvidia’s Jensen Huang, and Cristiano Amon of Qualcomm met with White House officials. “Without orders from Chinese customers, there will be much less need to go ahead with projects such as Intel’s planned factory complex in Ohio,” Gelsinger reportedly told US National Security Advisor Jake Sullivan.Furthermore, the Semiconductor Industry Association was cited as issuing a statement slamming the government’s restrictions as “broad, ambiguous and at times unilateral,” warning they could harm “the industry’s competitiveness.”“Right now, China represents 25 percent to 30 percent of semiconductor exports. If I have 25 percent to 30 percent less market, I need to build fewer factories… You can’t walk away from 25 to 30 percent and the fastest-growing market in the world and expect that you (continue) funding the (R&D) and the manufacturing cycle that we’ve released… This is strategic to our future; we have to keep funding the (R&D), the manufacturing, etc… Today, we have over 1,000 companies on the entities list, many of which have nothing to do with national security and nothing to do with security concerns in China,” Gelsinger later said at the Aspen Security Forum in July.

Semiconductor Trade War

It has been slightly over a year since the Biden administration took its first shot, with the US commerce department prohibiting companies from supplying advanced chips and chip-making equipment to China, and thus taking the trade war that his predecessor Donald Trump had waged against Beijing into the technological sphere. The restrictions, along with the Washington’s CHIPS and Science Act of 2022, were portrayed as aimed at limiting China’s technological prowess. The US government had cited national security concerns, claiming that it was restricting export of cutting-edge technologies that China could use for military purposes or to enhance its domestic semiconductor capabilities. The Chips Act included more than $52 billion in subsidies for US semiconductor manufacturers. In response, China had warned that the industrial policy bill to support the local producers of semiconductors would disrupt global supply chains and hamper international trade.”The United States stated that the act aims to increase the competitiveness of US technologies and the semiconductor production, however this act provides huge subsidies to US enterprises producing chips and introduces a differentiated policy of industry support, some provisions of which, among other things, restrict the normal investment and trade and economic activities of relevant Chinese enterprises, as well as normal scientific and technical cooperation between China and the US,” Chinese Foreign Ministry spokesman Wang Wenbin had said.Beijing checkmated by saying it needed to protect its own “national security and interests,” and first sanctioned US semiconductor giant Micron Technology in May, 2023. It then set in place export restrictions on rare earths. The two strategic raw materials, gallium and germanium, are crucial for the world’s electronic chip-making industry. As China produces upwards of 80 percent of the world’s gallium, and 60 percent of its germanium, experts were quick to predict that it could take “generations” for the US to replace lost Chinese capacity.

In early August, the White House announced that US President Joe Biden signed an executive order that authorized the Secretary of the Treasury to regulate certain US investments into Chinese entities engaged in activities involving national security sensitive technologies in three sectors: semiconductors and microelectronics, quantum information technologies, and certain artificial intelligence systems.

The US has also urged its partners – South Korea, Japan, the Netherlands, and the government in Taiwan – restrict or ban chip sales to China, and to relocate production facilities out of or away from China, such as to Europe or the United States. EconomyChina’s Rare Earths Export Curbs May Sink US’ Microchip Manufacturing Ambitions1 August, 13:50 GMTChina, the largest global semiconductors market, has repeatedly warned that by imposing restrictions on normal trade, the United States will end up harming itself as well as other market players.”The US measures to restrict chip exports to China violate market rules and lead to fragmentation in the global semiconductors market, which not only harms lawful rights and interests of Chinese companies, but also significantly affects the interests of semiconductors manufacturers throughout the world, including in the US,” , Chinese Commerce Ministry spokesman He Yadong said in September.To counter Washington’s restrictions, reports surfaced in September that Beijing was seeking to provide its own semiconductor chip manufacturing industry with financial support. The People’s Republic of China was described as gearing up to launch a state-backed investment fund to bolster the country’s semiconductor industry.Sputnik ExplainsWhat Materials are Used to Make Microchips?7 August, 16:48 GMT

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