‘Chip alliance’ will break supply chains – Opinion
Editor’s note: The global chip faces a new challenge in the form of the United States, which, going against international norms and established practices, wants to monopolize the production and supply chains in order to hindering China’s progress in advanced chip manufacturing and thus How can countries cooperate to facilitate the development and growth of the global chip industry? Three experts share their views on the issue with China Daily.
The United States is trying to establish its leadership in global semiconductor supply chains by courting Japan, the Republic of Korea and Chinese Taiwan in a “Chip 4 alliance”, the preliminary meeting of which is expected to be held soon .
The so-called alliance of semiconductor powers has limited means to deal with the global shortage of chips and could end up disrupting global industry and supply chains. The United States’ heavy reliance on imports to meet its semiconductor needs and increased imports until the outbreak of the COVID-19 pandemic caused a global chip shortage. The United States is trying to form the “Chip 4 alliance” to ease the supply shortage in the country.
Since last year, the US State Department has been trying to turn its chip cooperation mechanism into an alliance between the governments and companies of allied and partner countries, which essentially support the States’ domestic chip industry. to restore US control over supply chains and isolate China.
US President Joe Biden signed the CHIPS and Science Act of 2022 on August 9, which includes a $52 billion investment to boost chip manufacturing and strengthen research and development to create more jobs, secure supply and to compete with China. Chipmakers who move their manufacturing units to the United States can receive subsidies and tax benefits, but with conditions that prevent them from increasing their investments in China for 10 years – a decision that can be profitable for states. United in the short term, but harmful in the long term. Course.
After the US Department of Commerce issued specific regulations, major chipmakers, such as Intel, Samsung and the Taiwan Semiconductor Manufacturing Company, could not improve their production in mainland China, meaning that despite their massive investments and their arrangement, they can end up making low end products and therefore incur huge losses.
The US Congress passed the CHIPS Act ignoring calls from Intel and the US Semiconductor Industry Association not to do so. But Japan, the Republic of Korea and the Taiwan region and their chip companies should continue to negotiate with the US administration on specific terms to protect their long-term interests.
Major chipmakers in the “Chip 4” economies such as Micron, Intel, Samsung, SK Hynix, TSMC and United Microelectronics Corporation all have production units on the mainland, which contributed around 20% of net revenue of Intel and more than half of Qualcomm’s global revenue in 2021. Additionally, data cited in a Yonhap report by the Korea Chamber of Commerce and Industry shows that ROK’s chip exports to the China grew 12.4 times, from 3.2% in 2000 to 39.7% in 2021.
The global semiconductor industry and supply chains operate on the principle of comparative advantage. Through fair competition and international division of labor, chipmakers have established a reasonable resource allocation mechanism.
And if fair and balanced competition is hindered by factors such as excessive government intervention, technological monopoly and asymmetric information, the functioning of the market could be affected, resulting in huge losses for governments, businesses and consumers.
Moreover, excluding China from global chip industry chains will not be easy. For example, by imposing sanctions on China and stifling its investment channels, the United States will deal a heavy blow not only to Chinese semiconductor companies, but also to international giants of information technology and communications that operate in China. Apple, for example, has many manufacturing units in China. At least 30 companies in Apple’s supply chain have factories in Shanghai alone, including Foxconn, a major Apple assembler.
In addition, factories based in China import semiconductors from other countries and regions and reassemble them into finished products which are exported to many parts of the world. Thus, by imposing sanctions on China, the United States will significantly disrupt the chip industry and supply chains.
To prevent this from happening, the economies that the United States is trying to bring into the “Chip 4 alliance”, along with other economies and chipmakers, should take steps to keep the industry and existing supply chains to ensure their sustainability. development and continue to make handsome profits.
As for the Republic of Korea, Japan and the Taiwan region, they could use the Regional Comprehensive Economic Partnership, other free trade agreements and cooperation mechanisms to protect industry and supply chains in East Asia. A high-demand market can be a powerful promoter of technological innovation and an engine of productivity and growth.
The author is a visiting professor at the International Business School of Beijing Foreign Studies University. Opinions do not necessarily reflect those of China Daily.