U.S. Suppression Unlikely to Hinder Growth of China's Semiconductor Industry

The measures taken by the United States to suppress China's semiconductor industry are unlikely to achieve their intended effects, according to market experts. Instead, these actions may actually enable China to handle challenges more effectively.

Although U.S. suppression may create temporary barriers, particularly in the realm of advanced chips, the increased demand for domestic chips is expected to drive China's semiconductor sector forward.

Recently, the Office of the U.S. Trade Representative announced that it would be launching an investigation into China's semiconductor industry, focusing on China's efforts to dominate this critical sector. This investigation falls under Section 301 of the Trade Act of 1974, which allows the U.S. to probe foreign trade practices.

In response, China's Ministry of Commerce expressed strong dissatisfaction and opposition to this investigation, labeling it as an example of unilateralism and protectionism. A spokesperson from the ministry stated that the U.S. is attempting to suppress China's industry to serve its own political interests, which will ultimately disrupt global semiconductor supply chains and negatively impact U.S. businesses and consumers.

During the announcement, the ministry highlighted that the U.S. supports its semiconductor industry through significant subsidies provided by the CHIPS and Science Act. Despite holding nearly half of the global semiconductor market share, the U.S. continues to exaggerate the so-called threat posed by China's industry.

The spokesperson pointed out that U.S. Department of Commerce data indicate that Chinese semiconductors account for only 1.3 percent of the U.S. market, with a significant imbalance in trade as well.

Experts believe that while the U.S. strategies may challenge specific Chinese companies, the rising demand for local chip production will stimulate growth in both the domestic market and exports. Zhou Mi, a researcher at the Chinese Academy of International Trade and Economic Cooperation, noted that this situation will lead companies in China to make more cautious decisions, ensuring the security and stability of their supply chains. He also suggested that these U.S. strategies could ultimately weaken American competitiveness in the global market.

Despite facing restrictions, China's semiconductor export figures have shown impressive growth this year. Data from the General Administration of Customs revealed that from January to November, integrated circuit exports reached 1.03 trillion yuan (approximately $141.12 billion), indicating a 20.3 percent increase from the previous year.

According to Su Dongjun, vice president of the China Electronics Enterprises Association in Beijing, the U.S. actions will likely lead to significant changes in the global semiconductor market. This pressure will push China to step up its independent research and development efforts.

Su also suggested that other nations might begin to evaluate the risks associated with depending on a few countries for essential component supplies, potentially leading to a more diversified global supply chain.

John Neuffer, the president and CEO of the Semiconductor Industry Association in Washington, shared concerns about diminishing overseas demand for U.S. semiconductors. He emphasized the importance of collaborating closely with the semiconductor industry to address these challenges, arguing for a proactive agenda that can create new demand for U.S. chips both domestically and internationally.

China, Semiconductors, Markets