US-China tech war: US chip innovation is hurt by Beijing’s ‘mercantilist’ strategies, Washington think tank says
- US think thank ITIF estimates that China’s protectionist policies have led to 5,100 fewer US semiconductor patents annually
- Beijing has ramped up support for its domestic semiconductor industry amid US sanctions and increased tension between the two countries
China’s policy of using government incentives to boost its semiconductor industry has hurt innovation at companies in the US and other market-driven economies, according to a report from a Washington-based think tank released on Thursday.
The assertion from the Information Technology and Innovation Foundation (ITIF), a non-profit organisation founded in 2006 by Robert Atkinson, comes as China continues to pour resources into its local semiconductor industry to reduce the country’s reliance on imported technologies. That effort has intensified in recent years amid US restrictions of hi-tech exports to Chinese businesses such as Shenzhen-based Huawei Technologies Co and Shanghai-based Semiconductor Manufacturing International Corp (SMIC).
The ITIF report, authored by the foundation’s director of global innovation policy Stephen Ezell, said China has adopted a “mercantilist” approach in its semiconductor industry, using a “state-directed” strategy that distorts the global chip market with subsidies and intellectual property theft. The Chinese government has always denied that it has engaged in any theft of foreign intellectual property.
Absent Chinese government interference, “there would be 5,100 more US patents” in the semiconductor industry annually, according to ITIF. This is because the industry is heavily reliant on research and development to maintain profits that fund the next generation of innovations. As subsidies have helped Chinese firms gain market share, US companies have invested less in R&D than they otherwise would, according to the report.
The think tank suggested that Washington work with like-minded nations and to enhance domestic chip capabilities by granting its own subsidies, including spending US$10 billion to attract chip manufacturing facilities and investing US$7 billion in semiconductor research agencies over five years.
In the report, titled Moore’s Law Under Attack: The Impact of China’s Policies on Global Semiconductor Innovation, ITIF also suggests the US to enhance “investment screening” to combat state-sponsored economic espionage.