In early 2024, the US side took many decisive actions to limit risks to the country’s semiconductor chip industry from China’s influence. Specifically, the US is trying to clearly draw boundaries, minimizing dependence on old-generation chips produced by China that are widely used in household products, electric vehicles,…
China and its unique direction in the semiconductor chip industry
While many countries are following the trend of developing advanced, compact, optimized chips (from 8 nanometers or less) for applications in smartphones, supercomputers and data centers (especially Taiwan and South Korea), China chose the opposite direction. China focuses its capacity on traditional chips, also known as large chips or popular chips with sizes of 28nm or larger. These semiconductor chips take advantage of production technology from 10 to 20 years ago but are still used in many types of everyday goods, even military equipment.
According to a Rhodium Group report in April 2023, China and Taiwan together could account for nearly 80% of global 20 to 45 nm chip production capacity in the next 3 to 5 years. The group also added that in the 50 to 180nm range, China currently controls about 30% of capacity and within the next decade could control about 46% of global capacity. These are numbers that speak to the huge market share of China’s traditional semiconductor chip sector in the near future.
The US is concerned about China’s expansion of traditional chips
Currently, household products, electric vehicles, and even military missiles using traditional Chinese semiconductor chips as the foundation are being widely used. That situation does not only occur in the United States, but has spread all over the world.
According to Jimmy Goodrich, semiconductor expert and senior consultant at RAND Corp. on technology issues, pointing out that old Chinese semiconductor chips are underpinning everything. And in the future, just as China did with solar power, it will likely dump traditional chips to eliminate competitors, leaving the US and other countries dependent on small semiconductor chips. big in China.
According to experts, data shows that China is ready to become the dominant global traditional chip manufacturer before 2030 with a relatively self-sufficient supply chain.
Decisive action by the US and response from China
As soon as they realized that older generation chips were still widely used in everything, Congressman Mike Gallagher (Republican member) and Congressman Raja Krishnamoorthi (Democrat) worried about the risk. affecting US economic security, they jointly sent a letter to US Secretary of Commerce Gina Raimondo and Trade Representative Katherine Tai calling for urgent action to prevent and reduce dependence on less advanced US chips. China by all means:
- US lawmakers also proposed the idea of establishing a “component tariff” to impose import taxes on the underlying chip itself, not just the finished product.
- The U.S. Department of Commerce said it plans to award a $162 million grant to Microchip Technology, a technology corporation established under the Science and CHIPS Act to support semiconductor chip manufacturing efforts in the US. water.
- Previously, the Department of Commerce also announced that it would conduct a survey to determine how US companies source traditional chips.
Afterwards, Chinese Foreign Ministry spokesman Mao Ning said that the US’s tightening of curbs on Chinese semiconductor companies was “comprehensive economic bullying”.
She said the measures taken by the United States go beyond the realm of national security. “US behavior is seriously damaging the stability of global industrial and supply chains. It poisons the atmosphere of international cooperation and fuels division and confrontation.”
Facing the tense situation between China and the United States, many experts estimate that China will respond by increasing support for chip companies such as SMIC (currently the leading semiconductor company in China, second only to Taiwan’s TSMC), thereby devaluing the traditional chip segment and gradually dominating the market. Currently, SMIC is a formidable opponent of UMC Microelectronics Corp in Taiwan and GlobalFoundries of the US. However, this company still has the ability to expand production scale many times.