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American processor chip law ‘a threat to global trade’ says China

The Chinese Foreign Ministry says the Joe Biden-backed legislation will ‘disrupt international trade and distort global semiconductor supply chains’.

August 10, 2022
10 August 2022

China has criticised a US law to encourage processor chip production in the United States and reduce reliance on Asian suppliers as a threat to trade and an attack on Chinese business.

The law signed this week by President Joe Biden promises $52 billion in grants and other aid to investors in US chip factories.

It responds in part to warnings that supplies might be disrupted if China attacks Taiwan, which produces up to 90 per cent of high-end chips. China’s ruling Communist Party claims the self-ruled island as part of its territory.

The measure will “disrupt international trade and distort global semiconductor supply chains”, said a Foreign Ministry spokesperson, Wang Wenbin. “China firmly opposes that.”

Parts of the law “restrict companies’ normal investment and economic and trade activities in China”, Wang said, without giving details.

Disruption in chip supplies following the coronavirus pandemic hampered production of goods from smartphones to cars and highlighted the world’s reliance on Taiwanese chips and Chinese factories that assemble most electronic devices.

Reuters
Joe Biden delivers holds a semiconductor chip during the recent shortage. (Jonathan Ernst/Reuter)

Fears of disruption have been heightened by Chinese threats to attack Taiwan, which split with the mainland in 1949 after a civil war.

Beijing launched military drills around the island last week in retaliation for a visit by US House of Representatives Speaker Nancy Pelosi. China believes visits by American officials to Taiwan might encourage its leaders to make its de facto independence permanent, a step the mainland says would lead to war.

The CHIPS and Science Act calls for research spending that would total about $200 billion over 10 years, according to the Congressional Budget Office.

The Communist Party has spent tens of billions of dollars developing China’s own chip production industry. Its factories make low-end chips for cars and other products but cannot supply high-end chips for smartphones and other devices.

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