Bipartisan leaders of a U.S. House of Representatives panel said the Biden administration needs to take stronger action to curb China's growing dominance in manufacturing mature microchips that are indispensable to multiple U.S. industries.
Lawmakers are calling for new measures, including possible tariffs, aimed at countering overreliance on China for less advanced chips, according to a letter seen by The Wall Street Journal. Wisconsin Republican Mike Gallagher, chairman of the U.S. House Special Committee on China, and the committee's ranking Democratic member, Raja Krishnamoorthi of Illinois, sent a letter to President Biden's top business and trade officials on Friday.
Cutting-edge chip manufacturing has attracted political attention as chips become increasingly important to economic prosperity and national security, raising U.S. concerns about China's expanding control of the industry. High-performance chips are critical in artificial intelligence, cloud computing, cyber warfare and espionage.
Older generation chips are still widely used in consumer electronics, automobiles, home appliances and the defense industry - areas that are also of strategic importance to the United States. The representatives said in the letter that China could become the dominant supplier of an important technology and then use that position to punish foreign competitors.
Representatives urged USTR and Commerce secretaries to "leverage all existing trade authorities" or develop new mechanisms to protect supply chains for older chips. The Office of the U.S. Trade Representative is responsible for trade policy, while the Commerce Department is responsible for promoting economic growth and enforcing export restrictions.
China's control of other industries has also created trade tensions. For example, China has dominated the supply chain for solar panels, flooding the market with cheap products. Hemlock Semiconductor, a U.S. manufacturer of polysilicon used in solar panels, has cut production and laid off workers amid downward price pressure and the trade dispute.
China has spent tens of billions of dollars to expand its chip industry despite several rounds of U.S. restrictions on exports of chip manufacturing equipment to China. SEMI, an industry body representing chipmakers and suppliers, estimates that Chinese chipmakers will launch 18 production projects this year and China's chip production capacity will expand by 12%. Chinese companies are estimated to have purchased more than $30 billion in chip-making equipment last year, a record high and accounting for about a third of the global total. Most of China's new chip factories are focused on producing older-generation chips that are not affected by current U.S. restrictions.
The business and trade body did not immediately respond to a request for comment.
In recent months, Congress and the Biden administration have moved to support U.S. production of less cutting-edge chips through $53 billion in Chips Act funding. The funding includes billions of dollars likely to be spent on older-generation chip production in the U.S., and although most of the grants are just starting to go out, they are expected to go toward costlier, cutting-edge chip-making projects.
The U.S. Commerce Department said last week that it plans to provide Microchip Technology with a $162 million CHIP Act grant to support its traditional chip manufacturing efforts.
The grant is expected to support plant expansions in Gresham, Ore., and Colorado Springs, Colo., at a cost of more than $1.6 billion. The Commerce Department said the projects would nearly triple the company's production of microcontroller chips - small processors commonly used in cars and home appliances - as well as other specialized traditional chips used in industry, defense and aerospace.
The Commerce Department also said it would begin an investigation into the U.S. semiconductor supply chain this month to support traditional chip production and counter China's role in it.
Commerce Secretary Gina Raimondo said last month: "It is a matter of national security to respond to non-market conduct by foreign governments that threaten the traditional U.S. chip supply chain."