The House Select Committee on the Chinese Communist Party (CCP) has urged the Biden administration to take urgent actions targeting Chinese foundational semiconductors. This is to prevent the Chinese regime from dominating the semiconductor market.
“While the Administration has taken strong actions to ensure U.S. advanced semiconductor technology is not transferred to [China], far less attention has been given to the risk that a surge of China-made foundational chips poses to U.S. economic security,” the Committee said in a letter dated Jan. 5 to Secretary of Commerce Gina Raimondo and United States Trade Representative (USTR) Katherine Tai.
In the letter, Chairman Rep. Mike Gallagher (R-Wis.) and Rep. Raja Krishnamoorthi (D-Ill.), the ranking member of the committee, expressed concerns about the potential influx of Chinese-made foundational semiconductors, also known as legacy chips, into the U.S. and global markets. They highlighted that such an influx could undermine U.S. economic security.
The U.S.-China race on semiconductors has been the center of a technology competition that could shape the world’s technology leadership in the next decades.
According to a report by Congressional Research Service, the Chinese regime aims to achieve 70 percent self-sufficiency in the semiconductors industry by 2025.
In 2014, the regime founded the National Integrated Circuit Industry Investment Fund, also known as Big Fund, as part of China’s major effort to boost its chip industry. The fund received an initial $22 billion investment and announced another $33 billion investment in 2019. In September, Beijing planned to set up a new semiconductor state-backed fund to raise $41 billion to ramp up its effort to compete with the United States in this critical area.
“If the United States becomes dependent on [China] for foundational chips, our military and economic well-being may run the risk of being overly reliant on the CCP,” the lawmakers warned.
The Chinese communist regime has used non-market policies to enhance its chip industry with extensive support. In addition to directly investing billions in chip firms, it has also offered incentives such as lower taxes, favorable financing, and preferential land pricing, among others, according to a report by the geopolitics think-tank Silverado Policy Accelerator.
Due to these unfair trade practices, Chinese chip firms can offer prices up to 30 percent lower than their foreign competitors for certain products, thereby gaining further market share. In 2022, China became the second-largest semiconductor exporter, with exports valued at an estimated $125 billion, the report noted.
“With foundational semiconductors central to nearly all applications, including aerospace and defense, these trends portend further pricing pressure and market share losses for U.S. and allied competitors, similar to what the solar and steel sectors have experienced,” the report warns.
China and Taiwan represented 80 percent of the global capacity for chips 20-45 nanometers. For chips 50-180 nanometers, China could control around 46 percent of the global foundry capacity within a decade, according to research from the Rhodium Group.
The two lawmakers warned that “without coordinated intervention by the world’s key economies, these trends will continue.”
“Urgent action is needed to prevent [China] from dominating foundational chips, which would give [China] excessive leverage over the modern global economy,” they added.
Mr. Gallagher and Mr. Krishnamoorthi urged the Office of the United States Trade Representative (USTR) and the Department of Commerce (DOC) to use “all existing trade authorities” to prevent the flow of Chinese-made foundational chips into the United States. The pair also inquired whether the administration possesses the authority to impose ‘component tariffs’ on foundational chips, as opposed to finished products, and what additional powers might be required if this power does not currently exist.
The Epoch Times has reached out to the DOC and the USTR for comment.
Other Restrictions
Last October, with bipartisan support, the Biden administration imposed sweeping export controls aimed at weakening Beijing’s chip ambitions. The restrictions limited certain U.S. exports of chips and chipmaking tools to China.
Since then, the United States has introduced a series of additional restrictions to further prevent the Chinese regime from accessing U.S. technology.
In July, the Senate backed a bill that requires U.S. firms to notify the Department of Treasury if they have investments in Chinese firms with sensitive technologies—including semiconductors, artificial intelligence, quantum computing, and hypersonics—over national security concerns.
In August, President Joe Biden signed an executive order banning outbound U.S. investments in critical technologies that “significantly advance the military, intelligence, surveillance, or cyber-enabled capabilities of countries of concern.”
In October, Mr. Gallagher and Chairman Michael McCaul (R-Texas) of the House Foreign Affairs Committee urged the Biden administration to strengthen the enforcement of export controls on sending advanced computing chips and machinery required for their production to China.
The two Republicans said that existing U.S. export controls and related policies regarding Chinese tech companies are ineffective. They pointed out that these firms can exploit loopholes, resulting in significant advancements in chip technology that pose a national security risk.
In October, the DOC announced that it finalized rules under the CHIPS and Science Act to prevent China from benefiting from $52 billion in funding.
From The Epoch Times
