US-China Relations Updates

“Despite US sanctions against China, American companies such as Applied Materials were attracted to China’s chip conference.” A commentary from Nikkei Asia on the 19th expressed surprise that the 25th China International Integrated Circuit Manufacturing Annual Conference and Supply Chain Innovation Development Conference held in Guangzhou, China, on the 18th still attracted major American semiconductor companies. According to conference materials, American companies Applied Materials, Lam Research, and KLA  were the main sponsors of the event, and Germany’s Siemens was also present. Analysts believe that the high-profile sponsorship proves that American semiconductor companies are eager to maintain ties with China. Wei Shaojun, a professor at Tsinghua University’s School of Integrated Circuits, said at the conference that given the size of the Chinese market, global chip industry companies find it difficult to give it up.

The world’s largest market

According to media reports, the main theme of this year’s annual conference was “Establishing a New Development Stage and Building a Chip Development Pattern”. Nearly a thousand industry insiders, including experts, scholars, and outstanding entrepreneurs from China’s integrated circuit industry, attended the conference.

According to Nikkei Asia, the background of the 25th China International Semiconductor Integrated Circuit Manufacturing Exhibition is the Biden administration’s intention to block China’s access to advanced semiconductor technology. In 2022, the US enacted the “Chip and Science Act,” and subsequently, the US Department of Commerce announced that some high-end chip products would be included in the list of export-controlled commodities, attempting to comprehensively restrict and block the development of China’s high-tech industry. To this end, the US has also made great efforts to win over important countries involved in chip manufacturing, such as Japan and the Netherlands, to restrict exports of high-end chips and manufacturing equipment to China.

Xiang Ligang, chairman of the Information Consumption Alliance, believes that it is not surprising that US companies have come to participate in the 25th China International Semiconductor Integrated Circuit Manufacturing Exhibition. On the 19th, he told reporters from the Global Times that the “Chip and Science Act” did not prevent US companies from participating in related activities in China. “US companies are not very enthusiastic about building and expanding production in China, but they are very enthusiastic about selling products in China.”

China is the world’s largest semiconductor and equipment market. According to data from Semiconductor Equipment and Materials International(SEMI), in 2022, China led the world in semiconductor manufacturing equipment sales for the third consecutive year, with sales accounting for nearly 30% of the global total. Despite the impact of the pandemic and US trade pressure, sales only fell by 5% compared to the same period in 2021. An industry executive said that losing the Chinese market would not only harm global revenue but also hand growth opportunities over to Chinese competitors.

Allies Unhappy with US Actions on Semiconductor Sanctions against China

The US’s encouragement of its allies to sanction China’s semiconductor industry has also caused dissatisfaction among its allies. According to Nikkei Asia, Japan and the Netherlands spent half a year emulating the US’s semiconductor sanctions against China, but their business opportunities in China are being taken away by competitors.

Xiang Ligang said that the US government’s restrictions on chip sales primarily suppress its allies, preventing chip manufacturers from these countries from selling in China, while US companies take advantage of the situation to seize the Chinese market. For example, US companies such as Intel have obtained sales licenses in China through various means.

The US government’s unilateral control over semiconductor exports has been criticized by several groups in the US. According to Nikkei Asia, US business leaders are trying to push Washington to abandon its unilateral export control measures, believing that these measures are harmful to businesses. Currently, US industry groups, lawmakers, and experts are urging the White House to cooperate with other countries to develop measures to restrict technology exports to China to enhance the effectiveness of these measures, while minimizing harm to businesses.

The Korean newspaper, Hankook llbo, said that if the US continues to demand that its allies play a greater role in competing with China while maintaining its protectionist attitude that places its own industries and workers first, the cohesion of the alliance will inevitably weaken.

Stirring up Chinese semiconductor companies’ fighting spirit

The Financial Times reported that the US-China “semiconductor war” is ongoing, and China has also launched countermeasures against the US. Earlier this month, China’s Nation Internet Information Office announced that it would conduct network security reviews of products sold by US company Micron in China.

Time magazine analyzed on the 18th that the US and China are vying for global leadership in artificial intelligence, which is changing political, economic, and military power. The article stated that to lead China in artificial intelligence, the US needs to cooperate with China.

Wei Shaojun said that China’s cutting-edge semiconductor production level is currently at the 14-nanometer level. To reach the 2-nanometer or 3-nanometer level currently being promoted by the world’s leading chip manufacturers, China will have to rely on foreign technology. Although the US and its allies are trying to suppress China in advanced areas, Beijing will accelerate its efforts to promote “China-style” self-reliance in the semiconductor field.

At the conference, Jin Shenghong, Chairman of Yuecai Holdings, said that the Guangdong Semiconductor and Integrated Circuit Industry Investment Fund Phase II is in the planning stage, with a scale of 30 billion yuan and a fund term of up to 17 years. Tencent Cloud also recently announced that its self-developed video codec chip “Canghai” has been put into mass production and has been used in tens of thousands of pieces.

Xiang Ligang also said that the US’s “Chip and Science Act” has also stirred up Chinese semiconductor companies’ fighting spirit. “The US thinks that blocking will suppress Chinese companies, but that is impossible!” Xiang Ligang is confident in China’s chip supply capabilities. He believes that by 2025, China’s chip self-sufficiency rate will reach 50% or higher.