US maintains pressure on Chinese semiconductors despite senior official urging closer relationship

Mon 24 Apr 2023
Posted by: Phillip Adnett
Trade News

Microchip being inspected by scientist in lab equipment

US-China trade relations remain in a tense stalemate after Washington has asked South Korean microchip companies to resist supplying China if Beijing bans a US chip company in retaliation for the US clampdown on tech exports to China.

Beijing has launched a security review into Idaho-based Micron, one of the three dominant players in the Dram memory chip market alongside Samsung Electronics and SK Hynix, both of South Korea.

China and Hong Kong generated 25% of Micron’s $30.8bn in revenue last year, reports the FT.

Stop Chinese development

Washington believes the review is Beijing retaliating against US efforts to prevent China from obtaining or producing advanced semiconductors, as previously covered in the IOE&IT Daily Update.

Samsung and SK Hynix will not welcome requests to curtail trade with China, but the US could use upcoming renewal of export waivers for their Chinese produced chips as leverage.

According to Politico, president Joe Biden’s administration has begun briefing industry groups on an executive order to tighten trade controls with China even further.

Companies would have to notify the government of new investments in Chinese tech firms and deals would be prohibited in sectors like microchips.

TikTok ban and more

In addition, the US is considering a potential ban on the Chinese-owned app TikTok and could also hike tariffs on China over its failure to live up to its Phase One trade deal, signed under former president Donald Trump.

The news comes as the administration tries to walk a tightrope between controlling Chinese tech development and maintaining trade ties, with both economies on the brink of recession.

Despite rocky relations, White House officials are eager to reopen the economic dialogue.

Live together

Treasury Secretary Janet Yellen has said that the countries “can and need to find a way to live together” in spite of their strained relations, reports NBC.

“A growing China that plays by international rules is good for the United States and the world,” Yellen said in a speech.

“Both countries can benefit from healthy competition in the economic sphere. But healthy economic competition — where both sides benefit — is only sustainable if that competition is fair.”

However, Chinese Foreign Ministry spokesperson Wang Wenbin accused the US of building ‘small yards with high fences’ and pushing for decoupling and fragmenting industrial and supply chains”, reports Voice of America (VOA).

Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, told VOA that China sees the US definition of national security as “quite expansive”.

“Their concern is that a lot of the national security measures do, in fact, limit their technology and limit their prospects for growth,” he said.

Localisation

Meanwhile, the FT reports that Toyota has pledged to boost local supply chains in China for electric vehicles as it tries to remain competitive in the world’s largest car market.

In recent months, Japanese carmakers have posted the sharpest sales declines in China among foreign brands owing to the slow rollout of battery-powered vehicles.

Foreign carmakers all have joint ventures with local Chinese groups and companies have continued to invest in the market due to its sheer size.