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Bipartisan leaders of a U.S. House committee believe China’s growing dominance in making microchips using sophisticated processes critical to many U.S. industries requires stronger action by the Joe Biden administration to contain China.
Lawmakers called for new measures, including additional tariffs, to avoid overreliance on China for sophisticated process chips, according to a letter obtained by The Wall Street Journal. Rep. Mike Gallagher, R-Wis., chairman of the House Special Committee on the Chinese Communist Party, and Rep. Krishnamur, R-Illinois, the committee’s top Democratic member. Raja Krishnamoorthi wrote to Biden’s senior economic and trade officials outlining the matter last Friday.
As chips become increasingly important to economic prosperity and national security, cutting-edge chip manufacturing has attracted political attention, making the United States increasingly concerned about China’s growing control over the industry. High-performance chips are crucial for AI, cloud computing, cyber warfare and espionage activities.
Mature process chips are still widely used in consumer electronics, automobiles, home appliances and defense industries. These areas are also of strategic importance to the United States. The letter suggested that China could become a dominant supplier of a key technology and use its position to punish foreign competitors.
Representatives urged officials at the U.S. Trade Mission and Department of Commerce to “leverage all existing trade authorizations” or develop new mechanisms to protect the supply chain of mature process chips. The Office of the U.S. Trade Representative is responsible for trade policy, while the U.S. Department of Commerce is responsible for promoting economic growth and enforcing export restrictions.
China’s influence in some other industries has also led to trade tensions. For example, China has seized control of the solar panel supply chain, flooding the market with cheap Chinese products and squeezing out foreign competitors. Hemlock Semiconductor, a U.S. maker of polysilicon for solar panels, has cut production and laid off workers due to price pressure and the trade dispute.
Although the United States has imposed several rounds of restrictions on China that limit exports of chip-making equipment to China, China is still spending tens of billions of dollars to expand its chip industry.
According to estimates from the Semiconductor Industry Association International (SEMI), an industry organization that represents chip makers and suppliers, Chinese chipmakers will put 18 manufacturing projects into production this year and China’s chip production capacity will grow by 12%. Chinese companies are estimated to have purchased more than $30 billion worth of chip-making equipment last year, a record high and accounting for about a third of total global purchases.
Most new chip factories in China are focused on producing sophisticated process chips that are not affected by current US restrictions.
The U.S. Department of Commerce and the Office of the U.S. Trade Representative did not respond to requests for comment.
In recent months, the US Congress and the Biden administration have decided to allocate $53 billion in funding through the Chips Act to support the production of less advanced chips in the US. Billions of dollars of that funding could be used to make more sophisticated process chips in the United States, but the majority of the just-released funds are expected to be used for higher-cost, cutting-edge chip manufacturing projects.
The U.S. Department of Commerce announced last week that it plans to provide $162 million in CHIP Act funding to Microchip Technology to support its traditional chip manufacturing efforts.
The grant will support expansions at the Gresham, Oregon, and Colorado Springs, Colorado, plants that will cost more than $1.6 billion. The Commerce Department said the projects will nearly triple the company’s production of microcontroller chips – small processors commonly used in cars and appliances – and other specialized traditional chips used in industry, defense and aerospace would.
The U.S. Commerce Department also said it would begin an investigation into the U.S. semiconductor supply chain this month to support traditional chip production and counter China’s role in it.
US Commerce Secretary Gina Raimondo said last month: “Responding to non-market actions by foreign governments that threaten the traditional US chip supply chain is a matter of national security.” Raimondo noted that China has taken steps to address the to expand traditional chip production and manufacturing measures that make it more difficult for U.S. companies to compete.
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