US-China tech war: congressional think tank urges Biden to team up with Japan, EU to counter Beijing’s semiconductor push

A new congressional report recommends that the Biden administration put additional controls on US chip equipment exports

Beijing has been rolling out state subsidies and other incentives to drive China’s semiconductor expansion and technological self-reliance

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Visitors walk past a display of a semiconductor device at Semicon China, a semiconductor trade fair in Shanghai, China, on March 17, 2021. Photo: Reuters

Published: 8:00pm, 23 Apr 2021Updated: 8:00pm, 23 Apr 2021

A new US congressional report warns that Beijing’s efforts to boost domestic semiconductor capabilities could upend American dominance in technology, and calls on lawmakers to push the administration of President Joe Biden to join forces with Japan and the EU to counter Chinese measures.

“China’s state-led semiconductor policies, if successful, could lead to the loss of US technological leadership and significantly shift global semiconductor production and related design and research capabilities to China,” said the China’s New Semiconductor Policies report released Wednesday by the Congressional Research Service, an in-house think tank for US lawmakers.

The Semiconductor Manufacturing International Corp (SMIC) headquarters in Shanghai, China, on March 23, 2021. Photo: Bloomberg

Beijing, according to analysts, is trying to enhance tech self-sufficiency, but it is still looking for foreign capabilities to fill critical gaps. These efforts appear to focus on collaborations between China and countries that are not restricted by the US, according to the report.

Researchers suggested that US lawmakers consider additional measures to “encourage the Biden administration to accelerate efforts with Japan and EU to develop new plurilateral rules” to counter Chinese state subsidies. Since last year, Beijing has unleashed massive tax incentives to encourage home-grown development in China’s semiconductor industry, from chip design to manufacturing.

The report also recommended lawmakers tighten more controls on the export of US chip equipment, tools and software, noting that US sales of these items to China have increased three-fold since 2014.

The call joins a rising chorus of American voices supporting increasing confrontation with China amid an ongoing technology tussle between the world’s two largest economies.

Former Google CEO Eric Schmidt, chair of the National Security Commission on Artificial Intelligence (AI), said this week that the US should invest “lots of money” to “stay two semiconductor generations ahead of the Chinese”.

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