Chips Make It Tough for the U.S. to Quit China

In May, Idaho chip maker Micron Technologies was hit hard as part of the US-China tech war. The Chinese government has banned companies handling sensitive information from purchasing Micron’s chips, citing the company’s failure to pass a cybersecurity review.

Micron said changes can be destructive It accounts for about one-eighth of global revenue. But in June, the chipmaker announced it would increase its investment in China, adding $600 million to expand its chip packaging facility in the Chinese city of Xi’an.

“This investment project demonstrates Micron’s unwavering commitment to its China business and team,” a statement posted on the company’s China social media accounts said.

Global semiconductor companies are in a very difficult position to bridge the widening rift between the United States and China. The semiconductor industry has become ground zero in the technology race between the United States and China due to new restrictions and punitive measures by both the United States and China.

U.S. officials allege that U.S. products are being used in China’s military and surveillance programs against U.S. national security interests. It imposes increasingly stringent restrictions on the types of chips and chip-making equipment that can be sent to China, and new policies such as subsidies and tax credits for chip makers who choose to build new operations in the United States. offers generous incentives.

But factory construction can take years, and business ties between the two countries remain strong. China has become a major market for chips due to the large number of factories that produce chip-rich products such as smartphones, dishwashers, automobiles, and computers, and these products are exported all over the world and consumed by Chinese consumers. has been purchased by

Overall, China accounts for about one-third of global semiconductor sales. But for some semiconductor makers, the country accounts for 60% or 70% of their revenue. Even when chips are made in the US, they are often sent to China for assembly and testing.

“You can’t flip a switch and say you have to suddenly take everything out of China,” said Emily S. Weinstein, a researcher at Georgetown’s Center for Security and Emerging Technologies.

The industry’s reliance on China highlights how the two countries’ close but highly contentious economic ties pose challenges for both.

Those tensions were reflected in a visit to Beijing this week by Treasury Secretary Janet L. tried to walk a fine line by denouncing the

Yellen has criticized China’s recent punitive measures against foreign companies, including export restrictions on some minerals used in chip manufacturing, and said the Biden administration could reduce U.S. manufacturers’ dependence on China. suggested that it was such a measure that was being attempted. But she also asserted that US-China relations are strategic and important.

“The United States has made it clear that it does not seek a total separation of the two economies,” Yellen said at a roundtable with U.S. companies doing business in China. “We are aiming for diversification, not fragmentation. Separation of the world’s two largest economies would destabilize the global economy and would be virtually impossible to implement.”

The Biden administration is poised to start investing heavily in U.S. semiconductor manufacturing to attract factories from China. Later this year, the Commerce Department will begin issuing funds to help companies build chip facilities in the United States. The funding comes with conditions. Funded companies must refrain from expanding high-tech manufacturing facilities in China.

The administration is also considering further limits on chips sent to China as part of efforts to extend and finalize broader restrictions issued last October.

The measures include potential restrictions on the sale of advanced chips used in artificial intelligence to China, new restrictions on Chinese firms’ access to U.S. cloud computing services, and new restrictions on access to U.S. cloud computing services, according to people familiar with the paper. This could include restrictions on U.S. venture capital investment in China’s chip sector, the people said. schedule.

The administration is also considering suspending licenses that allowed some U.S. chip makers to continue selling products to Chinese telecom company Huawei.

Japan and the Netherlands, home to companies that make advanced chip-making equipment, have also imposed new restrictions on sales to China, at the request of the United States.

China has invoked its own restrictions, including new export controls on minerals used in chip manufacturing.

Tighter regulations and new incentive programs in the US and Europe are making global semiconductor companies increasingly look outside of China when choosing their next big investment. But construction of these facilities will likely take years, and changes to the global semiconductor market will become apparent over time.

John Neufer, president of the Semiconductor Industry Association, which represents the semiconductor industry, said in a statement that ongoing regulatory tightening poses a significant risk to the global competitiveness of U.S. industry.

“China is the world’s largest semiconductor market, and doing business in China is enough to keep growing, innovating and staying ahead of global competitors,” he said. “We urge solutions that protect national security, avoid inadvertent lasting damage to the chip industry, and avoid future escalation.”

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