Chips Make It Harder for Americans to Leave China

Chips Make It Harder for Americans to Leave China

In May, Idaho chip maker Micron Technologies suffered a severe blow due to the US-China technology war. The Chinese government has barred companies that handle critical information from buying Micron’s chips, saying the company has failed a cybersecurity review.

Micron said change can destroy About one-eighth of its global revenue. Yet in June, the chip maker announced it would increase its investment in China — adding $600 million to expand a chip packaging facility in the Chinese city of Xian.

“This investment project reflects Micron’s unwavering commitment to its China business and team,” said an announcement posted on the company’s Chinese social media accounts.

Global semiconductor companies are finding themselves in a tough spot as they try to navigate a growing rift between the United States and China. With new sanctions and punitive measures imposed by both sides, the semiconductor industry has become a bedrock of technology rivalry between Washington and Beijing.

US officials say American products have joined Chinese military and surveillance programs that are contrary to the national security interests of the United States. He has imposed ever-tighter restrictions on chips and chip-making equipment that can be shipped to China, and is offering new incentives, including grants and tax credits, for chip makers who choose to set up new operations in the United States.

But building the factories could take years, and corporate ties between the countries remain strong. China is a major market for chips, as it is home to many factories that make chip-containing products including smartphones, dishwashers, cars and computers, which are exported around the world and bought by consumers in China.

Overall, China accounts for about a third of global semiconductor sales. But for some chip makers, as much as 60 percent or 70 percent of their revenue comes from the country. Even when chips are manufactured in the United States, they are often sent to China for assembly and testing.

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

The industry’s reliance on China highlights that the close – but highly contentious – economic relationship between Washington and Beijing is creating challenges for both sides.

These tensions this week led to Treasury Secretary Janet L. This was reflected during Yellen’s visit to Beijing, where she tried to tread a fine path by criticizing some of China’s practices, while stressing that the United States was not looking to break ties with the country. .

Ms. Yellen criticized recent punitive measures taken by China against foreign companies, including limiting exports of certain minerals used in chip-making, and suggested such actions could lead to the Biden administration’s American Trying to make manufacturers less dependent on China. But he described the US-China relationship as strategic and important.

“I have made it clear that the United States does not want to take apart our economies wholesale,” Ms Yellen said during a roundtable with US companies operating in China. “We want to diversify, not divide. Separating the world’s two largest economies would be destabilizing for the global economy, and almost impossible to do.

The Biden administration is set to begin investing heavily in US semiconductor manufacturing to woo factories from China. Later this year, the Commerce Department is expected to begin handing out funding to help companies build US chip facilities. That money would come with strings: Companies seeking the funding must refrain from expanding high-tech manufacturing facilities in China.

The administration is considering even more curbs on chips that can be shipped to China as part of an effort to expand and finalize the sweeping ban it issued last October.

The measures include potential limits on sales to China of advanced chips used for artificial intelligence, new restrictions on Chinese companies’ access to US cloud computing services and US venture capital investments in the Chinese chip sector, according to people familiar with the information. Restrictions may be included. Schemes.

The administration is also considering suspending licenses granted to some US chip makers that have allowed them to continue selling products to Chinese telecommunications giant Huawei.

Japan and the Netherlands, home to companies making advanced chip manufacturing equipment, have also imposed new restrictions on their sales to China, in part because of urging from the United States.

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

Amid tighter regulations and new stimulus programs from the United States and Europe, global chip companies are increasingly looking outside China as they choose locations for their next major investments. But these facilities will take years to build, meaning any changes to the global semiconductor market will unfold slowly.

John Neffer, president of the Semiconductor Industry Association, which represents the chip industry, said in a statement that the continued increase in deregulation poses a significant risk to the global competitiveness of the US industry.

“China is the world’s largest market for semiconductors, and our companies simply need to do business there to grow, innovate and stay ahead of global competitors,” he said. “We urge solutions that protect national security, protect the chip industry from unintentional and permanent harm, and prevent future incidents.”

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