U.S. chip executives met with senior officials in the Biden administration on July 17 to discuss China policy as the semiconductor lobby group called for a halt to tighter restrictions under consideration.
US Secretary of State Antony Blinken spoke with semiconductor and supply chain executives after a recent trip to China, a State Department source said.
The meeting was attended by Commerce Secretary Gina Raimondo, National Economic Council Director Lael Brainard, and National Security Council Director Jake Sullivan. On the business side, there were big names in the semiconductor industry such as Intel, Qualcomm, and Nvidia.
The semiconductor industry is keen to protect its profits in the Chinese market, as the Biden administration considers further restrictions on chip exports. Last year, China imported $180 billion worth of semiconductors, or more than 30% of the global total of $555.9 billion, making it the largest single market, according to the Semiconductor Industry Association (SIA).
State Department spokesman Matthew Miller said Blinken heard directly from companies about supply chain issues and their operations in China. The discussion also included proposals to speed up the disbursement of subsidies in the CHIPS Act and ensure Washington’s policies do not deprive chip companies of a lucrative market.
The Commerce Department is overseeing a $39 billion semiconductor manufacturing subsidy program passed by Congress last year. The CHIPS Act also provides a 25 percent investment tax credit for building manufacturing plants, worth $24 billion.
Reuters sources said the US is focusing on blocking China's access to the most sophisticated artificial intelligence chips and considering the possibility of "squeezing" the computing power threshold of these items, but the level is not yet specific.
“Too lucrative” to ignore
Also on July 17, SIA called on the Biden administration to “exercise further restraint” on chip export restrictions to China as it is “the world’s largest trading market for semiconductors.”
The White House is now considering updating a sweeping set of rules imposed on Beijing last October, along with a new executive order to restrict some overseas investments.
“Our measures have been carefully tailored to focus on technology related to national security with the goal of ensuring that US and allied technology is not used against our country,” said a representative of the National Security Council.
The meeting between government officials and chip companies comes as China recently announced restrictions on exports of raw materials such as gallium and germanium used in semiconductor manufacturing.
The United States bought just $5 million worth of gallium and $220 million worth of gallium arsenide in 2022, according to government data. While the United States imported $60 million worth of germanium, Europe imported $130 million worth of germanium last year, according to data from S&P Global Market Intelligence.
Belgium, Canada, Germany, Japan and Ukraine can produce germanium. Japan, South Korea, Ukraine, Russia and Germany produce gallium. They have the potential to replace Chinese goods.
China’s scale allows it to produce both metals at lower prices than elsewhere, but Beijing’s new rules will have limited impact on global supply chains, Eurosia Group said. The real message, it said, is to remind countries like the US, Japan and the Netherlands that China still has retaliatory options, thus discouraging them from imposing new restrictions on access to chips and high-end tools.
Nvidia, Qualcomm and Intel are the biggest sellers in China. Only Qualcomm has a license from US regulators to sell mobile phone chips to Huawei Technology, while Nvidia and Intel sell AI chips specifically tailored for the Chinese market.
(According to Reuters)
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