43 top executives of US nationality employed by 16 Chinese semiconductor companies listed on the Shanghai Stock Exchange, Naura Technology, AMEC, Gigadevice, Kingsemi… will have to choose between keeping their jobs or losing their US citizenship. These executives, some of whom hold management positions at these companies, mostly have high-level skills acquired over decades at American companies in Silicon Valley.
This ban is part of updated rules by the US Department of Commerce. in early October that imposed strong restrictions on the export of chips produced in the United States. The Biden administration wants to restrict Chinese access to American chips, but also to the brains of these top-tier engineers. The goal is to make it that much harder for Chinese tech companies to attract such talent. These new regulations also affect the R&D laboratories installed by certain Chinese companies in the United States, such as the giants Tencent and Alibaba, present in Seattle and Silicon Valley.
“Our actions will protect the national security and foreign policy interests of the US while sending a clear message that US technology leadership is as much about values as it is about innovation” .Commerce Assistant Secretary for Exports Thea Rozman Kendler had bluntly justified when the export restrictions were announced.
This pressure will also be exerted on companies from third countries such as the Dutch ASML and the Japanese Mitsubishi and Toshiba to restrict their exports to China, even if they benefit from a year to align with the new rules.
Taiwanese TSMC will produce in the United States
As for the world’s leading Taiwanese TSMC, which alone produces more than half of the chips used in the world, it is doubly concerned. First, because the island claimed by China is a source of great tension with the United States, that have intensified since the visit in August by the Speaker of the US House of Representatives, Nancy Pelosi. Then, because China represents more than 10% of its market in 2020 (17% in 2019). If TSMC will be able to continue selling its products for a year in mainland China, even if they contain components from the United States, its future looks west, particularly with technology transfer. TSMC has already invested in the construction of a factory in Arizona, the production of which should begin in 2024..
“In the short term, the impact should be manageable for Taiwanese and Korean producers who have been granted one-year waivers to source equipment for their factories in mainland China. However, further technological rivalry could lead to China’s decoupling from the rest of the world with lower revenues and higher costs for technology hardware companies.”analyzes a report by S&P Global Ratings.
The race to produce the chips has become a stake in the battle between the two economic powers for world leadership. When promulgating, last August, the Token Law and Science Endowed with a sum of 52,000 million dollars, President Joe Biden intended to reactivate the local production of chips whose shortages due to bottlenecks in the post-Covid supply chains had shown that the country was no longer sovereign of products necessary for good functioning of the economy. These chips, which are the fourth most traded products in the world behind petroleum derivatives, they are present in all digital, computer and electronic products.
But the challenge is also to maintain technological supremacy. This is no longer a protectionist measure against foreign competition, but rather an obstacle to the development of a sufficiently powerful and independent Chinese semiconductor sector that would give the People’s Republic a technological advantage, particularly in the military field, artificial intelligence or even supercomputers.
However, to this day, China remains closely dependent on the United States, South Korea, Taiwan and Japan to ensure the development of its digital economy. According to official data, the sector accounted for a 39.8% share of Chinese GDP in 2021 compared to 20.9% in 2012. Local companies in the sector should be the main contributors to economic growth. In its five-year plan (2021-2025), the People’s Republic aims to increase the added value provided by these industries to 10% in 2025 from 7.8% in 2020.
in your program “Made in China 2025”the program drawn up in 2015 by Prime Minister Li Keqiang, Beijing showed its ambitions in terms of artificial intelligence, autonomous vehicles, new generation information technologies, telecommunications, robotics and even aerospace, 2049.
It is these ambitions that Joe Biden seeks to curtail today.
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