US Trade War Against China Fosters Chips Global Shortage

The United States has made no secret of its attempt to suppress China's chip development and manufacturing capabilities. However, a recent development suggests that it wants more -- to reshape the global landscape of the chip industry and establish hegemony in the field.

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The plan of SK hynix, a chipmaker in the Republic of Korea, to upgrade its production facility in China to make memory chips more efficiently is in jeopardy, because U.S. officials do not want advanced equipment used in the process to enter China. This is the latest example in a series of U.S. actions in pursuit of chip hegemony, which flout the principles of free trade. The essence of free trade is that free competition and exchange based on market mechanisms can realize more effective resource allocation, thus improving the efficiency of global production and enhancing global wellbeing.

The United States does not hesitate to undermine the same principles of free trade that it once advocated, engaging in such practices as blocking purchases and extorting confidential information from enterprises around the world. On June 8, the U.S. Senate approved US$52 billion for the CHIPS for America Act, to support the country's semiconductor industry over the next decade.

On Sept. 23, the U.S. Commerce Department asked global semiconductor manufacturers and automakers to "voluntarily" fill out a questionnaire about the supply chain in regard to chip inventory, sales, orders, customers' information and more. The request seemed more of an order than a choice. U.S. Commerce Secretary Gina Raimondo was quoted as saying in September, "we have other tools in our toolbox that require them to give us data. I hope we don't get there. But if we have to, we will." As of the deadline of Nov. 8, over 70 entities had submitted the questionnaire.

The United States stretches the national security concept, abuses state power, imposes trade and investment barriers against specific countries, and even extorts chip supply chain information from international chipmakers. Such actions not only undermine international trade rules and split the global market, but will also harm others and itself in the end. The chip supply chain is so complex that it has to remain globally distributed in order to maintain efficiency while keeping costs low.

The U.S. government's intervention has negative influences on the global chip industry, including its own chip enterprises, by disrupting industry resource allocation and causing huge waste.

According to Financial Times, the U.S. trade body Semiconductor Industry Association and the Boston Consulting Group estimate that a new semiconductor facility could cost about one-third more to build and operate in the United States over 10 years than a similar facility in East Asia.

The Boston Consulting Group also estimates it would take US$350-420 billion to create a complete semiconductor supply chain in the United States, an expenditure much higher than the CHIPS for America Act can cover. The global supply chain has reached its current state of balance over several decades of development by free trade and market mechanism. During the process, the United States has made progress in its semiconductor industry with massive profits.

With the development of global semiconductor industry, the United States has gradually faced competition from other countries and regions in the sector. Instead of carrying out fair competition, it chose suppressing potential competitors and disrupting free trade in order to retain its advantage.

What the U.S. is doing will have serious negative influence. Any intervention outside the market will tilt or even break the balance with numerous consequences, such as higher costs, repeated construction, delivery chaos and supply shortages. Thus, the U.S. attempt to seek chip hegemony could result in unbearable losses and chaos for the industry and global consumers, and will ultimately backfire.