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The U.S. move, widely seen as an attempt to boost U.S. competitiveness against China, particularly in the semiconductor industry, casts a shadow over Beijing’s long-term plans because the law could undermine China’s chip self-sufficiency ambitions and technological progress, analysts said. .
After more than two years of back-and-forth, the US Senate and House passed the Chips and Science Act this week, reflecting bipartisan agreement in Congress on the need to counter China’s technological advances. The bill has been strongly supported by US President Joe Biden, who has said he looks forward to signing it into law.
The move, which includes $52 billion in subsidies to US chipmakers on top of tens of billions of dollars for scientific research, could cast a shadow over China’s supply chain security and technological development, though the immediate impact is likely to be limited, analysts said.
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“The US has been urging companies to build chip factories for some time, and the incentives are huge,” said William Wang, CEO of Shanghai-based IC Cafe. “Many companies will be interested in participating … and it will definitely have an impact on China’s semiconductor industry.”
Any direct impact may take years to play out, Wang added, but the impact will depend on whether chip companies can use supportive US policies to shape the global industry.
The Chinese government has expressed concern about the law and its implications for China’s technology industry. Foreign Ministry spokesman Zhao Lijian said Thursday that China “absolutely opposes” the move, which would limit normal technology cooperation between the two countries, ahead of its approval in the House of Representatives on Thursday.
Gu Wenjun, senior analyst at ICWiz, a semiconductor consultancy, said the new incentives would reduce Chinese investments in international companies and shift capital, talent and industrial supply chains back to the US.
Senate Majority Leader Chuck Schumer (D-N) speaks to reporters during a press conference at the U.S. Capitol on July 28, 2022 in Washington, DC. Photo: AFP alt=Senate Majority Leader Chuck Schumer (D-NY) speaks to reporters during a press conference at the U.S. Capitol July 28, 2022 in Washington, DC. Photo: AFP>
U.S. efforts “to encourage indigenous semiconductor manufacturing capabilities undermine China’s ability to access global resources,” he said. In the long run, it could dry up technology transfer and cause a loss of talent for China, he said.
The US law is a response to the rapid growth of China’s technological power and ironically borrows from China’s playbook, providing federal funding to private sectors deemed critical to national security.
US lawmakers fear a decline in the country’s share of hi-tech manufacturing could deprive it of the power to compete with China in chips that power everything from smartphones and cars to servers and airplanes.
“As a percentage of GDP, our spending on basic research is less than half that of the Chinese Communist Party,” Senate Majority Leader Chuck Schumer said on Tuesday.
At the same time, China is not a leading player in the global semiconductor value chain because it depends on foreign technology. Li Yizhong, who served as Minister of Industry and Information Technology from 2008 to 2010, said earlier this month that China should redouble its efforts to contain semiconductor manufacturing and materials to reduce dependence on imports.
U.S. companies dominate the upper semiconductor value chain, with 13 of the world’s top 25 semiconductor suppliers in 2021 being U.S. companies, according to data from Gartner.
This article originally appeared on the South China Morning Post (SCMP), the most authoritative voice report on China and Asia for more than a century. For more SCMP stories, please browse the SCMP app or visit SCMP’s Facebook page and Twitter Pages. Copyright © 2022 South China Morning Post Publishers Limited All Rights Reserved.
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