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China, US relations further soured by CHIPS Act

Beijing says legislation designed to interfere with its own efforts to build homegrown semiconductor industry

China has reacted negatively to the passing of the US CHIPS Act, saying that the program is anti-competitive and aims to block the Middle Kingdom's efforts to build up its own semiconductor industry.

Tensions between the two have been further strained by the start of formal trade negotiations between the US and Taiwan, designed in large part to boost chip supply chain capabilities.

The US CHIPS Act was signed into law last week, letting loose $52 billion in funding to boost the American semiconductor industry as a part of the larger $280 billion CHIPS and Science Act, a move that was always likely to put China's nose out of joint.

According to Bloomberg, the chairman of the China Semiconductor Industry Association told delegates at an industry conference that the US legislation "contains elements that violate fair market principles," and that it is intended "to give China's rivals a helping hand."

"It contains essentially discriminatory clauses in market competition and creates an unfair playing field, which goes against the WTO’s fair-trade principles," the chairman is quoted as saying.

Previously, China's commerce ministry had complained that the CHIPS Act would "distort the global semiconductor supply chain and disrupt international trade," and stated that the country was prepared to take forceful measures to safeguard its legitimate rights.

This is despite reports that China has itself already invested $80 billion of a planned $150 billion in government subsidies aimed at building up its semiconductor industry by 2030.

In some ways, however, China is right, and America is trying to hinder the development of the Middle Kingdom's high-tech industries, especially in semiconductors. Earlier this week, the US banned the export of four technologies linked to semiconductor manufacturing, stating that withholding these was "vital to national security."

This ban included the semiconductor material gallium oxide and diamond, electronic computer-aided design (ECAD) software, and pressure gain combustion (PGC) technology.

The US has also made efforts to stop Netherlands-based ASML, one of the key producers of semiconductor manufacturing equipment, from exporting its products to China.

Washington has also been reported to be considering restrictions on shipments of US-made chipmaking equipment that can be used to produce memory technologies with more than 128 layers.

Meanwhile, the US and Taiwan have agreed to start formal trade negotiations designed to support Taiwan and bolster the resilience of supply chains, a move that looks set to further sour relations with Beijing.

Taiwan is vital to the global technology industries because it represents a large proportion of the world's semiconductor manufacturing industry, controlling 48 percent of the foundry market and 61 percent of the world's capacity to fabricate chips using a 16nm process node or smaller.

The Guardian reports that a spokesman for China's ministry of foreign affairs called on the US to "refrain from signing agreements" with Taiwan, and said that other countries should not have formal interactions with it in a way which has "sovereign connotations." ®

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