Focused Strategies Over Broad Import Bans
While Beijing's ambitions to lead in advanced microchips will likely falter
due to U.S. export controls, China is positioned to potentially dominate the
production of older semiconductor types. In the industry, “legacy”
semiconductors are defined as chips of at least 20 nanometers; the smaller the
size rating, the more advanced the chip. For chips in the 20-40 nm range,
Chinese chipmakers, buoyed by generous subsidies, are projected to add
production capacity exceeding the combined existing and planned production in
Taiwan, the current top source of such chips.
Importance of Legacy Chips
These legacy chips remain crucial for a significant portion of the
industrial base in wealthy economies, with applications ranging from electric
vehicles (EVs) to Internet of Things (IoT) devices. While the U.S. and other
nations should be cautious about becoming dependent on Chinese production in
another sector, efforts to hinder China's progress in legacy chipmaking face
significant challenges.
Challenges in Restricting China's Chipmaking
U.S. allies that host makers of chipmaking equipment and tools are unlikely
to support extending export controls further. Additionally, China already can,
or will soon be able to, produce much of the necessary equipment to manufacture
these legacy chips.
A Targeted Regulatory Approach
A targeted regulatory response to China's investment in legacy chip capacity
would best serve American interests. This approach would pave the way for
sustainable investment in legacy chipmaking within the U.S. and allied
countries, supporting present and future products like IoT devices and EVs. It
would also foster common interests and cooperation with partner nations,
proving more effective than broad tariffs given the complexity of international
trade in intermediate goods like chips
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