US and China semiconductor working group unlikely to ease trade tensions in short term but seen as a good start, say analysts
- The new working group serves as a communication channel for the two nations to find solutions in restricted trade of high-tech items like semiconductors
- However, trade tensions in the semiconductor sector would not be eased any time soon amid US-China rivalry, say analysts
The semiconductor working group set up between chip industry associations in China and the US is not a sign that trade tensions in the sector will ease anytime soon, but can build on the existing incentives for business cooperation, according to analysts.
The working group was set up between the China Semiconductor Industry Association (CSIA), a state-backed trade group, and Washington-based Semiconductor Industry Association (SIA), to create an avenue for communication on issues such as “export controls [and] supply chain security”, the CSIA said in a statement on Thursday.
“I think it’s a good sign,” said Nick Marro, lead for global trade at The Economist Intelligence Unit. “It affirms industry appetite to collaborate despite the politics, but I don’t think we can say it’s a game changer yet.”
However, the move did not generate much excitement among mainland Chinese-based semiconductor industry watchers, with one analyst at a major commercial bank saying the CSIA does not carry much weight in the industry. The analyst requested anonymity due to the sensitive nature of the matter.
A spokesman for the SIA told the South China Morning Post that the working group would focus on sharing public information regarding general trade matters and was not set up to ease export controls.
Nevertheless, China watchers think the group is a good start to establishing much needed communication between the two sides, especially given the companies that each association represents in their respective semiconductor industries.
“Politics and posturing can never be completely divorced from business...In any event, ‘easing export controls’ and ‘discussion on general trade matters’ are two sides of the same coin,” said Malcolm Penn, chairman and CEO of Future Horizons, a UK-based semiconductor research company.
Another industry insider, who also requested anonymity, said it was always good to have an additional channel open between the two governments to “look at things holistically and share things”.
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But he added people should be “realistic” and it was “naive” to think these trade groups could find quick solutions for such complex issues that involve not only technology but also geopolitics amid ongoing US-China rivalry.
Dale Gai, a research director at tech consultancy Counterpoint, said the SIA, which is the voice of the US semiconductor industry, is not always successful in convincing Washington to do something.
The SIA did not support the Trump administration decision to sanction Chinese foundry Semiconductor Manufacturing International Corp (SMIC) and its lobbying to have the Biden administration ease export controls to China has not been successful, he added.
In fact, Bloomberg reported on Friday that the restrictions were not being relaxed, at least not for US suppliers to Chinese telecoms giant Huawei Technologies Co, which will continue to be restricted from sourcing US technology used in 5G networks.
Gai said national security interests may outweigh business voices in the Biden administration’s geopolitical policies, and the SIA’s silence on the working group could be a sign of caution.
“Overall, I do not expect it will have an immediate impact on the current situation,” Gai said.
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Analysts interviewed by the Post agreed that the base for business cooperation between industries was still intact, but companies have to do a balancing act to navigate through a complexing geopolitical environment.
Marro expects that the current export controls will be maintained for the foreseeable future, adding that the existing restrictions will target the most innovative segments of the chip industry, with more flexibility on shipments of older generation or less sensitive technology.
“I think that when it comes to business, there’s always an incentive for free trade,” Marro said. “At the end of the day, companies want to make money, and it’s easier to do that when politics aren’t involved.”
Penn said the current trade restrictions are hurting US semiconductor equipment and materials companies as China was their largest customer, accounting for about 30 per cent of all sales.
“The issues that fueled the trade tensions are still there and have not been addressed ,” Penn said. “So do not expect an unwinding and trade restriction relaxations any time soon.”
