US, Europe growing alarmed by China’s legacy chip production, fear changing supply chains
- China has accelerated its production of older-generation semiconductors, leading to concerns that those chips could be dumped into the market
- The importance of legacy chips was highlighted by supply shocks that roiled companies, especially carmakers, at the height of the Covid pandemic
US and European officials are growing increasingly concerned about China’s accelerated push into the production of older-generation semiconductors and are debating new strategies to contain the country’s expansion.
That’s sparked fresh fears about China’s potential influence and triggered talks of further reining in the Asian nation, according to people familiar with the matter, who asked not to be identified because the deliberations are private. The US is determined to prevent chips from becoming a point of leverage for China, the people said.
Commerce Secretary Gina Raimondo alluded to the problem during a panel discussion last week at the American Enterprise Institute. “The amount of money that China is pouring into subsidising what will be an excess capacity of mature chips and legacy chips – that’s a problem that we need to be thinking about and working with our allies to get ahead of,” she said.
While there’s no timeline for action to be taken and information is still being gathered, all options are on the table, according to a senior Biden administration official. A US National Security Council spokeswoman declined to comment, while a European Commission spokesperson said the agency will take necessary measures to preserve its interests and was working to reduce the region’s dependence on foreign firms for both mature and advanced chips.
The most advanced semiconductors are those produced using the thinnest etching technology, with 3-nanometres state of the art today. Legacy chips are typically considered those made with 28-nm equipment or above, technology introduced more than a decade ago.
Senior EU and US officials are concerned about Beijing’s drive to dominate this market for both economic and security reasons, the people said. They worry Chinese companies could dump their legacy chips on global markets in the future, driving foreign rivals out of business like in the solar industry, they said.
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