MARKET DISTORTION:China’s plan to expand its share of the US semiconductor market from 9% to 70% by 2025 has been criticized as a move that would stifle tech innovation.
Massive government investment in China’s semiconductor industry risks distorting the global market for integrated circuits, leading to damaging overcapacity and stifling innovation, US Secretary of Commerce Penny Pritzker said.
The comments come at a time of growing trade tension between China and the US over accusations of dumping, industrial overcapacity and a souring business climate for foreign firms doing business in China.
Republican US presidential candidate Donald Trump has threatened to levy punitive tariffs of 45 percent on imports of Chinese goods if he is elected.
In a speech on Wednesday, Pritzker sharply criticized a US$150 billion plan by the Chinese government to expand the share of Chinese-made chips in the US market to 70 percent by 2025, from 9 percent now.
“Let me state the obvious: This unprecedented state-driven interference would distort the market and undermine the innovation ecosystem,” Pritzker said at the US Center for Strategic Studies think tank in Washington.
That level of investment would be equivalent to half of worldwide semiconductor sales last year and result in market distortions similar to those plaguing the steel, aluminum and “green” technology industries, Pritzker added.
“The world has seen the effects of this type of targeted, government-led interference before,” she said.
“The result has been overcapacity in the global marketplace that has artificially reduced prices, cost jobs in both the US and around the world and caused significant damage to those industries globally,” Pritzker said.
It was “imperative we take steps to prevent a similar situation from developing in the semiconductor industry,” she added.
Such steps include a US Department of Commerce study of the global semiconductor supply chain now under way, besides engaging with China, and other governments, to persuade them to avoid policies that distort markets or spur technology transfers.
“The US government will make clear to China’s leaders at every opportunity that we will not accept a US$150 billion industrial policy designed to appropriate this industry,” Pritzker added.
On Wednesday, 12 US senators urged that Zhongwang International Holdings Ltd’s US$2.3 billion purchase of Cleveland, Ohio-based Aleris Corp be rejected by a national security review panel.
Zhongwang, China’s largest aluminum processor, announced the deal to buy Aleris in August.
Aleris processes aluminum for numerous industries, particularly the auto and aerospace sectors.
It has an auto industry plant in Duffel, Belgium, and is building a new one in the southern US state of Kentucky. Aleris also makes aluminum parts for aircraft bodies and wings in plants in Koblenz, Germany and Zhenjiang, China.
The company also makes aluminum protective plating for military vehicles in Germany, a point on which the senators focused in their letter to US Secretary of the Treasury Jacob Lew.
“In addition, we are seeing new attempts by China to acquire companies and technology based on their government’s interests — not commercial objectives. And we have witnessed attempts to restrict access to China’s domestic market,” Pritzker said.
The technology industry depends on a global supply chain, open and fair trade, and innovation, she said.
“China’s effort to move up the value chain should be the result of healthy competition and free and fair trade, not state-directed investments aimed at distorting global markets,” Pritzker said.
“In addition, no government should require technology transfer, joint venture, or localization as a quid pro quo for market access,” she said. |
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