China’s Dominance in Microchip Manufacturing Requires Stronger Action from Biden Administration
Bipartisan leaders of the U.S. House of Representatives committee are calling for stronger action from the Joe Biden administration to contain China’s growing dominance in manufacturing microchips with mature processes that are critical to many U.S. industries.
According to a letter seen by The Wall Street Journal, lawmakers are urging new measures, including additional tariffs, to avoid overreliance on China for mature process chips. Rep. Mike Gallagher, R-Wis., chairman of the House Select Committee on the Chinese Communist Party, and Rep. Krishnamoorthi, R-Ill., the top Democratic member of the committee, wrote to Biden’s senior business and trade officials last Friday regarding the matter.
As chips become increasingly important to economic prosperity and national security, cutting-edge chip manufacturing has attracted political attention, making the United States increasingly concerned about China’s growing control over the industry. High-performance chips play crucial roles in AI, cloud computing, cyber warfare, and espionage activities.
Mature process chips are widely used in consumer electronics, automobiles, home appliances, and the defense industry–areas of strategic importance to the United States. The letter suggested that China could become a dominant supplier of an important technology and use its position to punish foreign competitors.
Representatives urged officials at the U.S. Trade Representative office and the U.S. Department of Commerce to “use all existing trade authorizations” or develop new mechanisms to protect the supply chain of mature process chips. The offices are responsible for trade policy and promoting economic growth and enforcing export restrictions, respectively.
China’s influence in other industries has also sparked trade tensions. For example, China has taken control of the solar panel supply chain, which has had implications for U.S. manufacturers and workers.
Despite previous restrictions on China, the country is still spending tens of billions of dollars to expand its chip industry. Estimates suggest that Chinese chip manufacturers will have 18 manufacturing projects put into production this year, and China’s chip production capacity will expand by 12%.
Most of China’s new chip factories focus on producing mature process chips, which are not currently affected by U.S. restrictions.
In recent months, the U.S. Congress and the Biden administration have moved to pass funding through the $53 billion Chips Act to support U.S. production of less cutting-edge chips. Billions of dollars in this funding may be used to produce more mature process chips in the United States.
The U.S. Department of Commerce plans to provide $162 million in CHIP Act funding to Microchip Technology to support its traditional chip manufacturing efforts. The grant is expected to support expansions at the company’s plants in Gresham, Oregon, and Colorado Springs, Colorado, and is aimed at nearly tripling the company’s production of microcontroller chips and other specialized traditional chips.
Commerce Secretary Gina Raimondo highlighted the national security implications of responding to non-market actions by foreign governments that threaten the U.S. traditional chip supply chain. She noted that China’s moves to expand traditional chip production make it harder for U.S. companies to compete, prompting an investigation of the U.S. semiconductor supply chain.
The U.S. Department of Commerce and the Office of the U.S. Trade Representative have not yet responded to reporters’ requests for comment. The Biden administration is facing growing pressure from lawmakers and industry leaders to take stronger action to counter China’s growing dominance in microchip manufacturing.