Quantum chips Photo: CFP

The US' containment will not hinder China's development, but only strengthen the country's resolve and capability of reaching self-reliance of high technologies, Chinese Foreign Ministry said on Wednesday, stressing that the US will make a rod for itself if it maintains its hegemony at the cost of normal international trade.

The comment came as the US Commerce Department on Tuesday (US time) unveiled "national security guardrails" of its CHIPS and Science Act, limiting recipients of US government funds from investing in most semiconductor manufacturing in countries including China for 10 years after the date of award.

The department will restrict chipmakers that obtain the funding from expanding output by 5 percent for advanced chips and 10 percent for older technology. It outlined other measures including a $100,000 spending cap on investments in advanced capacity in China, according to a document on the US government agency's website.

"The US' guardrails are outright technological blockade and protectionism," Foreign Ministry spokesperson Wang Wenbin said at a regular press briefing on Wednesday.

In order to maintain its own hegemony, the US has overstretched the concept of national security, abused export control measures, and even coerced some of its allies to block and contain China and attempt to fragment the industrial chains at the latter's expense, Wang said.  The US moves have seriously violated market economy rules and fair competition principle, and severely hinder world economic recovery and development, he said. 

"China is firmly opposed to US' moves and has lodged solemn representations to the US. China will firmly maintain the legitimate rights and interests of Chinese firms," Wang said.

The US' latest move came as the Biden administration has stepped up efforts to exclude China from the global semiconductor industrial chain, after it pressured the Netherlands and Japan to join its chip export controls to China and imposed sweeping export restrictions on shipments of chip-making tools to China last October.

However, industry experts said that the US' CHIPS and Science Act will unlikely succeed in attracting the return of chipmakers to the US, given better supply chain coordination and lower comprehensive costs in China, as well as China's attractiveness as the world's largest semiconductor market.

"By locating production in China, chipmakers not only enjoy cost and labor advantages, but are able to swiftly respond to Chinese clients' demand," Han Xiaomin, general manager of Jiwei Insights in Beijing, told the Global Times on Wednesday, citing media reports saying that TSMC has estimated chip production cost up 50 percent in the US than that in the island of Taiwan.

While the US has always paraded itself for free competition and market economy, direct subsidies may incentivize enterprises to scramble for government funding with whatever political measures and thus harm their innovation motivation, experts said.

He said the US' move will also harm the competition of others, as there are a couple of international chips from South Korea and the island of Taiwan which have facilities in the Chinese mainland, while almost no American firms have production here.

TSMC has facilities for manufacturing 28-nanometer and more advanced 16-nanometer chips in Nanjing, East China's Jiangsu Province. Samsung has a factory for manufacturing memory chips in Xi'an, Northwest China's Shaanxi Province, and another South Korean chip giant, SK Hynix, manufactures memory chips in Wuxi, Jiangsu Province, according to media reports.

"We will closely review the US government's announcements," SK Hynix told the Global Times on Wednesday. The company said that uncertainties are being cleared through discussions between the Korean and the US governments.

China is one of the world's most vibrant markets for 5G, artificial intelligence (AI) and the Internet of Things, and therefore some international chipmakers have life-and-death stakes if they lose the massive Chinese market, according to Han.

According to data released by the Semiconductor Industry Association, China remained the largest individual market for semiconductors in 2022, with sales in the country totaling $180.4 billion, about one-third of the global total.

In a sign of the growing costs of US' tech decoupling against China, many chipmakers in the US have been cutting staff, with the latest being Marvell Technology Inc. The Silicon Valley-based maker of wireless, data processing and storage chips will cut about 320 jobs, or 4 percent of its workforce in the US, its first significant layoffs in the US over recent years, reported domestic news outlet iJiwei, which tracks the semiconductor sector.

Marvell is also beginning a new round of layoffs in China, extending a job cut last from October, iJiwei reported. Marvell previously had as many as 1,000 people working in China, about 800 of whom were located in its research and development (R&D) center in Shanghai, its third-largest after its R&D centers in the US and Israel, according to media reports. 

Aim for breakthroughs

It has become increasingly obvious that Washington's crackdown moves on China's semiconductor industry are not as effective as it expected, as China is pooling nationwide resources for breakthroughs in core technologies, experts said.

China recently announced it will establish a central commission that will be in charge of reviewing major national strategies for scientific and technological development, which is one of the most powerful changes to the country's innovation system in decades, reflecting the country's determination to achieve core technological breakthroughs.

By establishing such a commission, China could combine policy-making and implementation so as to promote the development of the industry more efficiently, Ma Jihua, a veteran expert in the technology industry, told the Global Times on Wednesday, adding that it is believed certain major breakthroughs have been made.

Ma pointed out that China's chip producers have already seen rapid growths over recent two years. They have greatly boosted domestic replacement and also gained more market share in the world.

China's imports of integrated circuits dropped 26.5 percent year-on-year to 67.58 billion units in the first two months of 2023, while the import value fell 24.9 percent to 329 billion yuan ($47.6 billion), data from the General Administration of Customs revealed.

While the US continues to push forward "tech decoupling," China will continue to promote cooperation and exchanges with other countries and foreign institutions for the healthy development of the global semiconductor industry, Ma said.

Experts said that the US' mounting containment on China's chip sector also goes against Washington's pragmatic needs for economic cooperation with China amid potential economic recession, high inflation and the unfolding bank crisis in the US.

It's reported that US Treasury Secretary Janet Yellen and Commerce Secretary Gina Raimondo are considering a trip to China to talk about economic issues.

"It's Washington's wishful thinking to increase economic cooperation with China while conducting sinister moves against China," Ma said, noting that the best choice is restoring trade and tech cooperation with China for the benefit of both countries and the world economy as a whole.