US losing to China in semiconductor race: Expert

By Al Mayadeen English
Source: The Post
23 May 2023 19:58

On Monday, Chinese authorities announced a complete ban of the use of US-owned company Micron semiconductors.

Semiconductor chips are seen on a circuit board of a computer in this illustration picture taken February 25, 2022. (Reuters)

An analysis published by Philip Pilkington for The Post on Tuesday revealed on Tuesday that the US is still lagging behind China in its semiconductor race despite efforts to contain or isolate China's semiconductor industry in the global market.

This was particularly evidenced by a ban the Chinese government enforced on Sunday, outlawing semiconductors from the American company Micron among operators of "critical infrastructure" in China. According to Pilkington, things could have been far worse, had Beijing banned imports of the chips altogether. But even that simple regulatory measure has severe consequences on the US company as it generates about 16% of its profits from China.

Right after the announcement was issued, South Korea made it clear it would not prevent the Chinese from purchasing chips from their own companies as a means of substituting the American-made semiconductors. They said that it was up to South Korean company owners to decide whether or not to sell their own chips to China. As per the words of an industry leader who was quoted by the Financial Times, "Even if we increase our supply to Chinese customers, how can they examine all these deals individually and judge that the increased volume comes from us, replacing Micron’s?"

South Korea's refusal to abide by US foreign policy is a clear indicator that the trade war the US is spearheading against China has its own limits.

Due to their "non-fungible" nature, semiconductors are a distinct item over which the US is waging a trade war against China.

But as in the case of Russian crude, the global market is working in ways that are clearly circumventing the rules established by the Status Quo.

"The only way America can make its trade war work is to convince a substantial slice of the world economy to put in place similar restrictions to those being imposed by Washington," explains Pilkington.

But the case of the ban on Micron chips shows that restrictions engender counter-restrictions - triggering a sort of vicious circle that eventually backfires on US and Chinese companies alike.

"Countries like South Korea are simply not interested in getting involved [in such a trade war]," Pilkington says.

Earlier today, an analyst warned that isolating China is "impossible" and "dangerous", following the Group of Seven (G7) summit in Japan, where the forum members focused the efforts against China.

In a final communique issued at a summit in Hiroshima, G7 leaders claimed that "our policy approaches are not designed to harm China nor do we seek to thwart China’s economic progress and development. ... At the same time, we recognize that economic resilience requires de-risking and diversifying."

Giuliano Noci, vice-rector for China for Politecnico di Milano, told CNBC’s Squawk Box Europe on Monday that the G7 showed a "unitarian" view against China.

"[President Joe] Biden spoke in terms of de-risking and not in terms of decoupling," Noci indicated.

"Decoupling was the magic word of the United States still a month ago, but it is very clear that, given the role played by the Chinese market for several products, given the level of intertwines among supply chains, it is almost impossible to decouple," he pointed out.

Noci considered that "it should be clear that isolating China will be not only, on the one hand, impossible but also, on the other hand, dangerous."

CNBC considered that US President Joe Biden's administration's move may reflect the conclusion that it will take an incredible amount of work and economic suffering to decouple its economy from that of China.