China daily post a article about chip 4 alliance.The global chip industry is facing a new challenge, that is, the United States, which violates international norms and established practices and wants to monopolize the production and supply chain to curb China’s progress in advanced chip manufacturing, thereby curbing China’s rise. How can countries cooperate to promote the development and growth of the global chip industry? The three experts shared their views on this issue with China Daily.
The United States is trying to establish its leadership in the global semiconductor supply chain by seeking Japan, South Korea and Taiwan to join the “Chip 4 Alliance”. The preliminary meeting of the Alliance is expected to be held in the near future.
The so-called semiconductor giant alliance has limited means to solve the global chip shortage, but it may eventually disrupt the global industry and supply chain. The United States relies heavily on imports to meet its semiconductor demand, and the increasing imports before the outbreak of New Coronary Pneumonia led to a global chip shortage. The United States is trying to form a “Chip 4 Alliance” to alleviate the country’s supply shortage.
Since last year, the US State Department has been trying to upgrade its chip cooperation mechanism to an alliance between the governments and enterprises of allies and partners, essentially supporting the US domestic chip industry, so as to re-establish the US control over the supply chain and isolate China.
On August 9, President Joe Biden of the United States signed the 2022 Chip and Science Act, which includes 52 billion dollars of investment to promote chip manufacturing and strengthen research and development, so as to create more jobs, ensure supply and compete with China. Chipmakers who transfer their production units to the United States can obtain subsidies and tax incentives, but the additional conditions limit their investment in China within 10 years – a move that is beneficial to the United States in the short term, but harmful in the long term.
Once the US Department of Commerce issues specific regulations, top chip manufacturers such as Intel, Samsung and Taiwan Semiconductor Manufacturing Company will not be able to upgrade their production in mainland China, which means that although they have made a lot of investment and layout, they may eventually produce low-end products, which will cause huge losses.
The United States Congress passed the Chip Act despite the appeal of Intel and the American Semiconductor Industry Association. However, Japan, South Korea and Taiwan and their chip manufacturing companies may continue to negotiate specific terms with the U.S. government to safeguard their long-term interests.
Leading chip manufacturers in the “Chip 4” economy, such as Micron, Intel, Samsung, SK Hynix, TSMC and United Microelectronics, all have production units in mainland China, which contributes about 20% of Intel 2021’s net income, accounting for more than half of Qualcomm’s global income. In addition, according to the data cited by Yonhap in a report of the Korea Chamber of Commerce and Industry, South Korea’s chip exports to China increased by 12.4 times, from 3.2% in 2000 to 39.7% in 2021.
The global semiconductor industry and supply chain operate based on the principle of comparative advantage. Through fair competition and international division of labor, chip manufacturing companies have established a reasonable resource allocation mechanism.
If fair and balanced competition is hindered by excessive government intervention, technology monopoly, information asymmetry and other factors, the operation of the market may be affected, causing huge losses to the government, enterprises and consumers.
In addition, it is not easy to exclude China from the global chip industry chain. For example, by imposing sanctions on China and blocking its investment channels, the United States will cause a heavy blow not only to Chinese semiconductor companies, but also to international information and communication technology giants operating in China. For example, Apple has many production 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, Chinese factories import semiconductors from other countries and regions, reassemble them into finished products, and export them to many regions of the world. Therefore, by imposing sanctions on China, the United States will greatly disrupt the chip industry and supply chain.
In order to prevent this from happening, the economies that the United States is trying to join the “Chip 4 Alliance”, as well as other economies and chip manufacturing companies, should take measures to maintain their existing industries and supply chains, so as to ensure their sustainable development and continue to earn considerable profits.
As for South Korea, Japan and Taiwan, they can use the regional comprehensive economic partnership, other free trade agreements and cooperation mechanisms to protect the industry and supply chain in East Asia. A market with strong demand can effectively promote technological innovation, productivity and growth.