Hasty Reaction to China’s Taste for Wafers?
There has been growing angst in the United States (US) about China’s designs in the semiconductor sector. What seems to have elevated the level of anxiety is the fact Chinese firms now are throwing around billions of dollars to acquire American and European semiconductor firms like Lattice Semiconductor (US) and Aixtron (Germany). Largely in response to Chinese moves, Barack Obama, at the end of his 2nd term, launched a study of the state of the US semiconductor sector that devoted substantial attention to China.
To ensure US supremacy, the final report called for diverse steps including potentially restrictive measures on Chinese investment in the chip sector. The issuance of the report was joined with demands that China open its chip sector in return for being granted the opportunity to acquire US chip firms and technologies. At first glance, all of this seems quite reasonable given the semiconductor sector is a vital one for national defense and the industry. Moreover, there is no doubt China has been parochial in the way it has treated American semiconductor firms seeking to enter or operating in China. It remains open to question, though, if a strategy aggressively limiting Chinese investment or blocking Chinese access to chip technologies is a wise one. Questions that need to be asked before implementing such policies include: (1) would the aforementioned limitations and demands for reciprocity really work? (2) is every chip firm and technology truly critical? And (3) would pushing Chinese efforts “underground” be better than seeing what was transpiring above ground? The new Donald Trump administration needs to carefully consider these and other questions lest it adopts poor policies that, in the final analysis, leave the US no more secure than before, deny it the economic benefits of Chinese investment, and engender a more protectionist, hostile China.