US suppression unlikely to stall growth

The United States' suppressive measures will not succeed in hindering the growth of China's semiconductor industry, but will instead empower it to navigate challenges more effectively, market watchers said on Tuesday.

They noted that even though suppression actions by the US will create short-term obstacles in areas such as advanced chips, the growing use of domestic chips will fuel the development of the industry in China.

The Office of the US Trade Representative announced on Sunday the initiation of an investigation regarding "China's acts, policies and practices related to targeting of the semiconductor industry for dominance". The investigation will be conducted under Section 301 of the Trade Act of 1974, according to a news release.

China is strongly dissatisfied with and firmly opposes this move and the Section 301 investigation clearly reflects unilateralism and protectionism, a spokesperson for the Ministry of Commerce said late on Monday.

The US has initiated a new Section 301 investigation into China's semiconductor industry policies, aiming to suppress China and serve the US' domestic political interests, the spokesperson said in a statement. This action will disrupt and distort global semiconductor industrial and supply chains, and will harm the interests of US businesses and consumers, the spokesperson added.

The ministry pointed out that through the CHIPS and Science Act, the US provides large subsidies to its semiconductor industry, and its companies hold nearly half of the global semiconductor market share, and yet it hypes the so-called "threat" from China's industry.

"This is clearly contradictory and completely baseless," said the spokesperson, pointing out that a recent report by the US Department of Commerce revealed that Chinese semiconductors account for just 1.3 percent of the US market. Chinese chip exports to the US are far lower than China's imports from the US.

Although the US policies have posed challenges for some Chinese companies, the increasing demand for domestically produced chips will drive growth in both exports and production, said Zhou Mi, a researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing.

"For Chinese companies, this may result in more cautious sourcing decisions to ensure the security and stability of their supply chains," he said. "As for the US, this approach could weaken its competitiveness in the global market in the long run."

Despite the US restrictions, China's semiconductor exports have experienced notable growth this year. During the January-November period, the nation's integrated circuit exports totaled 1.03 trillion yuan ($141.12 billion), marking a 20.3 percent year-on-year increase, data from the General Administration of Customs showed.

Su Dongjun, vice-president of the Beijing-based China Electronics Enterprises Association, said that the US moves could have a profound impact on the global semiconductor market. This will push China to accelerate its efforts in independent research and development, Su said.

"It could also prompt many countries to reassess the risks of relying on specific countries for key component supplies," Su added.

Expressing concern over declining overseas demand for US semiconductors, John Neuffer, president and CEO of the Washington-based Semiconductor Industry Association, said that given the prevalence of semiconductors throughout the US economy, the association urges the Office of the US Trade Representative to work closely with the industry throughout the process. The association represents 99 percent of the US semiconductor industry by revenue.

Leaders in Washington should pursue a proactive and affirmative agenda that creates new demand for the US chips at home and overseas, Neuffer said in a statement on Monday.