Prof. ST Hsieh
Director, US-China Energy Industry Forum
May 25, 2023
Historically, war has no winners but survivors: the one who suffers less is proclaimed as a winner. It is particularly true for trade wars. Even though there is no direct sacrifice of lives but damages to both economies. Further, in a globalized world today, both manufacturing, market, and supply chain are shared by many nations.
It is easy for politicians at one nation’s capital to come up with one set of trade policy laser focused on protection of national security. However, it is important to take advice from the real business world. The US led Chip war against China may have un-intended consequences that backfires on the US.
For example, as pointed out by Nvidia’s chief, the US unilaterally imposed ban of some chip exports to China risks US companies losing the China market. His caution that” There is no other China, there is only one China” should be taken very seriously. He also implies that one has to be ready for China’s push backs. Any trade war could spiral out of control.
South Korea government’s warning that “The Republic of Korea believes the ‘guardrail provisions’ should not be implemented in a manner that imposes an unreasonable burden on companies investing in the United States” and calling for the US to review and clarify the announced “guardrail” clause in the Chips Act, must be addressed as soon as possible. Because it could mean the ultimate failure or success of the US policy.
Chip wars with China risk ‘enormous damage’ to US tech, says Nvidia chief
Chip wars with China risk ‘enormous damage’ to US tech, says Nvidia chief Jensen Huang tells lawmakers to be ‘thoughtful’ about imposing more export controls on Beijing Nvidia chief Jensen Huang: ‘If we are deprived of the Chinese market, we don’t have a contingency for that.’ The chief executive of Nvidia, the world’s most valuable semiconductor company, has warned that the US tech industry is at risk of “enormous damage” from the escalating battle over chips between Washington and Beijing. Speaking to the Financial Times, Jensen Huang said US export controls introduced by the Biden administration to slow Chinese semiconductor manufacturing had left the Silicon Valley group with “our hands tied behind our back” and unable to sell advanced chips in one of the company’s biggest markets. At the same time, he added, Chinese companies were starting to build their own chips to rival Nvidia’s market-leading processors for gaming, graphics and artificial intelligence. “If [China] can’t buy from . . . the United States, they’ll just build it themselves,” he said. “So the US has to be careful. China is a very important market for the technology industry.” The US’s efforts to prevent China buying or developing advanced chips has become the most aggressive front in a new cold war between the two powers. Huang’s comments came just days before Chinese authorities announced a ban on US memory chipmaker Micron’s products from critical infrastructure, a move seen as the first significant retaliation against Washington’s export controls. The Taiwanese-American executive warned US lawmakers to be “thoughtful” about imposing further rules restricting trade with China. “If we are deprived of the Chinese market, we don’t have a contingency for that. There is no other China, there is only one China,” Huang said, adding that there would be “enormous damage to American companies” if they were unable to trade with Beijing. Huang added that blocking the US tech industry’s access to China would “cut the Chips Act off at the knee”, referring to the Biden administration’s $52bn funding package to encourage construction of more semiconductor manufacturing facilities — known as “fabs” — in the US. “If the American tech industry requires one-third less capacity [due to the loss of the Chinese market], no one is going to need American fabs, we will be swimming in fabs,” he said. “If they’re not thoughtful on regulations, they will hurt the tech industry.” However, the California-based company has been blocked from selling its most advanced chips — the H100 and A100 series — to Chinese customers since August when the US imposed export controls on technology used for AI. Nvidia has been forced to reconfigure some of its chips to comply with US rules limiting the performance of products sold in China. Huang said China made up roughly one-third of the US tech industry’s market, and would be impossible to replace as both a source of components and an end market for its products. Most of the world’s advanced chips — including Nvidia’s — are made in Taiwan, which Beijing claims as part of its territory. President Joe Biden has said the US would intervene if China took unprovoked military action against Taiwan. Analysts fear such a conflict would lead to severe global disruption in production of everything from cars to computers. It’s all about the chips in the AI war “We can theoretically build chips outside of Taiwan, it’s possible [but] the China market cannot be replaced. That’s impossible,” Huang said. “So you’ve got to ask yourself which way do you want to push it.” China, including Hong Kong, accounted for more than a fifth of Nvidia’s sales in its latest financial year ending January 2023, according to its annual report, while Taiwan represented more than a quarter. The figures reflect the “billing location” of its customers, which could include contract manufacturers who then sell on to “end customers” in other markets.
South Korea warns US could ‘overburden’ its chipmakers with China limits
South Korea warns US could ‘overburden’ its chipmakers with China limits Seoul expresses concern about ‘guardrails’ in Chips Act affecting US subsidies and Chinese expansion Song Jung-a in Seoul has called on Washington to review its conditions for new semiconductor subsidies, revealing its concerns over the impact of US legislation on Korean chipmakers’ operations in China. The US Chips and Science Act offers $52bn in subsidies to chipmakers building new production facilities in the US, but contains “guardrails” detailing the limits on those receiving federal funds, in terms of expanding or upgrading their advanced chip capacity in China over the next 10 years. South Korea is home to leading memory chipmakers such as Samsung Electronics and SK Hynix, who are boosting investments in US production facilities even as they remain heavily exposed to the Chinese market. “The Republic of Korea believes the ‘guardrail provisions’ should not be implemented in a manner that imposes an unreasonable burden on companies investing in the United States,” South Korea said in a statement on the proposed funding rules of the Chips Act. “In this vein, the RoK requests the US government to review the proposed rule’s current definitions of ‘material expansion’, ‘legacy semiconductor’ and other key terms,” the statement added. The US in October introduced expansive chip export controls in an effort to slow China’s progress in making advanced semiconductors, barring US companies from supplying technology for D-Ram chips that are more advanced than 14 nanometres, and for Nand memory chips with 128 layers or more. The Korean government also requested that Washington further clarify the scope of restricted activities under a “technology clawback” clause. This requires the recipients of federal funding to return US subsidies if they knowingly engage in any joint research or technology licensing effort with “foreign entities of concern” for a technology or product that raises national security concerns. Samsung, the world’s largest memory chipmaker, is building a $17bn foundry plant in Taylor, Texas, while second-ranked SK Hynix is planning to build an advanced chip packaging plant in the US. But they have both been caught up in growing US-China tech rivalry as Washington’s curbs on technology transfers threaten to weaken their competitiveness in China. Under the Chips Act rules proposed in March, they are required not to expand capacity for advanced chips in China by more than 5 per cent for a decade, in order to receive federal funding. Seoul’s state-run Yonhap News said on Wednesday that the Korean government had asked Washington to double the limit to 10 per cent. South Korean chipmakers are heavily reliant on their Chinese plants for a substantial part of their D-Ram and Nand flash memory chip production. Samsung produces about 40 per cent of its Nand flash memory chips from its Xian plant, while SK Hynix’s plant in Wuxi in eastern China accounts for nearly half of its global D-Ram output. The Biden administration in October gave the two Korean chipmakers a one-year reprieve from export controls designed to curb China’s ability to develop high-end chips and has signalled to them that it will extend permission for them to send US chipmaking tools to China. But experts said it would be difficult for the Korean chipmakers to significantly upgrade their Chinese production facilities or expand their capacity there, which would weaken their long-term competitiveness in China. “They are just trying to buy time, hoping for the best while preparing for the worst,” said Lee Jae-min, a law professor and trade expert at Seoul National University.