US moves will only backfire and spur China in high-tech

Chips have become the bone of contention in global high-tech competition, especially among major economies, because the United States is weaponizing semiconductors, in a bid to check China's progress in advanced technology.

As part of the anti-China campaign, US President Joe Biden signed the CHIPS and Science Act of 2022 into law on Aug 9. The US administration is projecting the law as a $52 billion package to bolster chip manufacturing in the US by, among other things, granting subsidies and tax deductions to US-based multinational companies that shift their manufacturing units to the US and increase production. It has also promised to provide about $200 billion as research funds in the next few years.

But the subsidies and other benefits, according to the law, come with specific conditions. The most prominent among them is barring beneficiary firms from upgrading or expanding their advanced chip manufacturing capacity in China for 10 years, thus forcing them to choose sides in the US-China competition.

By adopting a carrot and stick policy, Washington is trying to woo US companies to "reshore" to boost the US' semiconductor industry and exclude China from the chip industry and supply chains.

The bill, perhaps the most important industrial policy introduced by the US since the end of World War II according to Intel CEO Patrick Gelsinger, shows how the US has been using its global hegemony to come out on top in every competition.

For instance, the US has already blockaded or severed the supply of key technologies to Chinese high-tech companies such as Huawei by misusing its so-called Entity List. Beginning 2018, the US has put 641 Chinese entities on the list－and vowed to add another 33 Chinese entities to the so-called unverified list in 2022 to more strictly control exports.

Three days after Biden signed the act, the US announced that it would cut off the supply of electronic design automation tools required for gate-all-around field-effect transistor technology and related 4G semiconductor materials such as diamond and gallium oxide to China. The move is aimed at preventing China from achieving breakthroughs in making sub-3 nanometer semiconductors using gate-all-around field-effect transistor technology, as it is considered vital to mass production of high-end semiconductors.

Besides, the US is trying to build a "Chip 4 alliance" with Japan, the Republic of Korea and the Taiwan island, in order to squeeze the Chinese mainland out of the global industry chains and curb its technological innovation drive.

But the chip design and manufacturing technologies are highly complicated and the leading and supporting industrial systems way too complex. And thanks to the continuous deepening of the industrial division of labor, major chip manufacturers are deeply embedded in the global value and industry chains.

So it is difficult for countries, even the US which has the first-mover technological advantage and the supporting industries, to build a completely independent chip industry chain on the basis of their respective domestic markets in the short term. That's why the US wants to build a chip alliance to monopolize the global chip technology resources and isolate China from the global industry chains.

Moreover, the chip alliance the US is trying to build cannot be complete in itself, since China is not only the largest semiconductor consumer market but also accounts for one-third of the global chip consumption. As such, no chip designer, manufacturer, wafer-tester or material and equipment maker can say no to China's huge market.

Unlike China, Japan didn't have the advantage of being the world's largest consumer market and perhaps that's why the US could use the trade wars of the 1980s to cripple the Japanese semiconductor industry. Also, the US is still struggling to overcome problems such as high operating costs and lack of human resources and hence may find it difficult to persuade chip makers to shift their production units to the US. That the US' move is in violation of the law of industrial development is another story.

However, that should not stop China from taking measures to maintain its strategic strength by controlling key core technologies and improving its technological backup capability, as well as preventing the "ecological isolation" of its chip industry. And it can do so, for example, by establishing multi-industry mutually beneficial cooperation on a larger scale and at a higher level with Japan and the ROK under the Regional Comprehensive Economic Partnership framework.

The author is a researcher at the Institute of Industrial Economics of the Chinese Academy of Social Sciences.

The views don't necessarily represent those of China Daily.

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