United States hit a chip manufacturer from China

The United States attacks at a Chinese state-owned chip maker for national security issues is at the center of the confrontation between the two economic superpowers over technology and trade. It also exposes the lack of successful local semiconductor manufacturers in China as one of the biggest vulnerabilities in the country‘s attempt to become a global technology powerhouse.

The US Department of Commerce announced that it will impose a restriction on US companies selling crucial software and technology to Fujian Jinhua Integrated Circuit Co., arguing that “it presents a significant risk of engaging in activities that are contrary to the interests of United States national security“.

The ban could put the chip maker on the ropes, which depends on foreign technology. A similar US measure against Chinese telecommunications equipment manufacturer ZTE in April paralyzed factories for months.

The US government did not provide details about the potential activities for which it is concerned. But Fujian Jinhua, which is owned by Fujian’s provincial government in southeastern China, has been accused of stealing trade secrets by US chip maker Micron Technology.

The Trump administration has said that China’s efforts to appropriate US technology are “an existential threat” to the future of the US economy. He has made the issue a central part of his trade struggle with Beijing, imposing tariffs on 250 billion dollars in Chinese products, and has threatened to impose more unless Beijing changes its industrial policies.

The Chinese government sees the situation in a very different way, considering that the need to develop high-tech manufacturing industries is vital for its economic development. In spite of the numerous complaints of the companies, it denies having tried to obtain intellectual property of the United States by unfair means.

Like the ZTE ban, the US measure against Fujian Jinhua will likely increase tensions between Washington and Beijing. Analysts see little chance of any of the parties backing down in the short term. Trade negotiations between the two parties have not made progress this year.

The chip dependency

President Xi Jinping has made the construction of the semiconductor industry in China a key priority, and has even compared a computer chip to the human heart. “No matter how great a person is, he can never be strong without a strong and solid heart,” he said in April during a visit to a semiconductor factory in central China.

According to research firm IC Insights, China buys more computer chips than any other country, consuming around 140 billion dollars, or 38%, of the world’s semiconductors. Despite its voracious appetite, China produced only $ 18.5 billion, or about 13% of the world’s chips.

Beijing is aggressively trying to close that gap, but developing a competitive chip industry is costly, politically sensitive and time consuming.

The government has invested billions in local chip makers such as Fujian Jinhua, Tsinghua Unigroup and Innotron Memory to help them develop their own intellectual property. Even the e-commerce company Alibaba is entering the game, and announced last month that it will create a company focused on making artificial intelligence chips for cloud computing, Internet-connected devices and other sectors.

Chinese companies have also tried to appropriate technology in their offers for foreign chip businesses. But several attempts to buy shares in US firms failed after US officials objected to the deals on the grounds of national security.

Despite the obstacles, China is eager to grow that industry. Beijing’s “Made in China 2025” plan – one of the industrial policies pointed out by the Trump government as a concern – includes the ambitious goal of achieving self-sufficiency in high-tech industries, including semiconductors, by 2025.

China needs foreign technology to further develop its own chip industry, according to SEMI, an international association for companies that supply the electronics industry.

We have to face the fact that there is still a certain gap between the national semiconductor industry and the international advanced level,” the group’s head for China, Lung Chu, told reporters in Shanghai last month. “Therefore, international cooperation is the key to the growth of the industry.”

With information from Expansion and Reuters


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  1. noviembre 2, 2018

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