Chinese Trade Groups: CHIPS Act and Science Law Hinders Innovation

While the U.S. semiconductor developers and production tools producers welcomed the U.S. CHIPS Act and Science law that will provide subsidies to American chip developers and manufacturers, two Chinese trade associations believe that the legislation hinders innovation, discriminates against foreign companies, and intensifies geopolitical tensions.

"The act will intensify the global geopolitical competition in the semiconductor sector and hinder global economic recovery and future technology innovations," a joint statement by the China Council for the Promotion of International Trade (CCPIT) and China Chamber of International Commerce (CCOIC) published by the state-backed Global Times reads.

The recently signed CHIPS Act and Science law authorizes the U.S. government to award local chipmakers about $52 billion in grants and other incentives as well as provide a 25% investment tax credit for new fabs worth up to $24 billion. Meanwhile, companies who receive funds under the CHIPS Act and Science legislation will be prohibited from building new or expanding existing fabs in China and other countries that present a threat to the U.S. national security over the following 10 years. In addition, the new law will grant tens of billions of dollars to various high-tech research and development projects in the U.S.

"On the one hand, it is a typical industry-specific subsidy, which does not conform to the non-discrimination principle of the World Trade Organization," the statement partly published by ChinaDaily reads. "On the other hand, the bill identifies particular countries as key targets, which leads companies to be forced to adjust their global development strategies and layouts."

It is noteworthy that China's local authorities co-own fabs operated by Semiconductor Manufacturing International Corp. (SMIC), the country's largest contract maker of chips. Meanwhile, state government backs Tsinghua Unigroup, which happens to own YMTC, the only national 3D NAND producer, as well as controls tens of chip designers.

"The US is using government power to forcibly change the international division of labor in the semiconductor field and harm the interests of companies from all over the world, including Chinese and American companies," a quote published by Anadolu Agency reads.

Nowadays the U.S. only produces 12% of the global chip output and is significantly behind Taiwan, South Korea, and China. Subsidies for chipmakers in the U.S. will make it more appealing for them to build fabs in America rather than in Asian countries. But another important part of the legislation promotes research and development in the U.S. About half of the world's chips are designed in the U.S., with additional subsidies from the federal government that share could grow, something that Chinese trade groups seem to also oppose.

In addition to subsidizing semiconductor research, development, and production in the U.S., the U.S. government has been restricting sales of American chip production equipment to Chinese manufacturers (e.g., SMIC) to prevent the country from using American technologies and equipment in military purposes. Meanwhile, CCPIT and CCOIC are confident that U.S. restrictions will not slow down Chinese semiconductor industry development.