More Voices Call for Action to Stop Chinese Control of Semiconductors – Including “Mid-Range Chips”

Stop Chinese Control of Semiconductors – Including “Mid-Range Chips”

This week started with an unusual endorsement of active export controls by a prominent financial titan. Warning of the prospect of a Chinese-dominated chip market in his annual letter to shareholders, JP Morgan Chase CEO Jamie Dimon stated:

But China, using subsidies and its economic muscle to dominate batteries, rare earths, semiconductors or EVs, could eventually imperil national security by disrupting our access to these products and materials. We cannot cede these important resources and capabilities to another country.

At the time, Ben Noon – writing a must-read story in Foreign Policy offers a cogent analysis of a problem the U.S. government has so far little considered: how to stop China from controlling the world’s legacy chip market.

Noon acknowledges the strategic importance of the export controls the Biden Administration imposed on Chinese advanced semiconductor makers last year, writing that they were “historic strides” for U.S. semiconductor policy. Now, writes Noon, the Administration should go further:

If U.S. policy does not shift to account for China’s existing capabilities and ambitions in these so-called legacy parts of the semiconductor sector, the United States and its allies could suffer grave commercial and strategic harm.

To that end, Noon sees China positioning itself to dominate the legacy market, especially through SMIC:

Semiconductors aren’t just needed for dazzling uses such as artificial intelligence and supercomputing. Mid-range chips between 16 nanometers and 40 nanometers are key components for everyday products at the heart of U.S. economic life, such as cars, laptops, gaming consoles, and tablets.

And China is on course to produce more and more of these chips. Take the 28-nanometer node, for example. China’s chip giants currently account for a relatively small portion of global production of this size, but that will soon change. China’s premier logic chip producer, Semiconductor Manufacturing International Corporation (SMIC), is expanding its 28-nanometer chip production, with new facilities in Shanghai, Beijing, Tianjin, and Shenzhen all slated to come online in the next two years. Chinese producers could produce a plurality of the world’s 28-nanometer chips in just a few years.

Noon closes with a recommendation that China Tech Threat endorses:

These challenges are real, but U.S. policy would be well served by raising the China export control standard from 16 nanometers to 40 nanometers. Doing so would zero in on the threat Beijing’s mid-range semiconductor ambitions pose to Washington’s economic security. 

The alarm bells are going off among foreign policy and financial experts alike. Now Congress and the Biden Administration must take action to stop a rising tide of a Chinese-dominated legacy semiconductor market before it’s too late.

In a report to be released soon, China Tech Threat will examine the problem more deeply and recommend solutions for policymakers to adopt.