US Plans To Scupper China’s Chip Ambitions

US Secretary of Commerce, Penny Pritzker says that China’s $150 billion IC investment plan could lead to overcapacity and the stifling of innovation,

“The US government will make clear to China’s leaders at every opportunity that we will not accept a $150 billion industrial policy designed to appropriate this industry,” said Pritzker,

“Let me state the obvious,” Pritzker told the Washington think-tank The Centre for Strategic Studies last week, “this unprecedented state-driven interference would distort the market and undermine the innovation ecosystem. The world has seen the effects of this type of targeted, government-led interference before. The result has been overcapacity in the global marketplace that has artificially reduced prices, cost jobs in both the United States and around the world, and caused significant damage to those industries globally.”.

Pritzker added that It was “imperative we take steps to prevent a similar situation from developing in the semiconductor industry.”

One step is a Commerce Department study of the global semiconductor supply chain which is currently underway, another is to consult other governments, including China, to try to persuade them to avoid policies that distort markets or spur technology transfers.

“We are seeing new attempts by China to acquire companies and technology based on their government’s interests – not commercial objectives,” added Pritzker, “and we have witnessed attempts to restrict access to China’s domestic market. China’s effort to move up the value chain should be the result of healthy competition and free and fair trade, not state-directed investments aimed at distorting global markets. In addition, no government should require technology transfer, joint-venture, or localization as a quid pro quo for market access.”