(PHOTO: VCG)

By TANG Zhexiao

U.S. President Joe Biden signed the Chips and Science Act into law on August 9, to improve the country's competitiveness with China.

However, China's increased focus on its domestic manufacturing is likely a function of U.S. restrictions on some of its biggest semiconductor companies, said Egypt Independent.

America invented the semiconductor, but today produces only about 10 percent of the world's supply , said the White House briefing, adding that the U.S. relies on East Asia for 75 percent of global chip production.

In contrast, data from the Semiconductor Industry Association showed that China remained the largest individual market for semiconductors, with sales totaling more than 190 billion USD in 2021, an increase of 27.1 percent.

The U.S. lacks capabilities to produce the most advanced chips at volume, said the Act, asserting that it would provide appropriations needed to implement the currently authorized programs.

Though the U.S. claims the Act is to ensure the country maintains and advances its scientific and technological edge, such decoupling restrictions is the wrong way to compete and will curb global technology progress. Meanwhile it reflects the country's growing lack of self-confidence in the face of China's rise.

The Act prohibits the recipients of federal incentive funds from expanding or building new manufacturing capacity, for certain advanced semiconductors in specific countries that present a national security threat to the U.S.

In particular, according to CHIPS and ORAN Investment Division A Summary, part of the Act, it would "require recipients of Federal financial assistance to join an agreement prohibiting certain material expansions of semiconductor manufacturing in People's Republic of China or in other countries of concern," to ensure the manufacturing incentives advance U.S. technology leadership and supply chain security.

Moreover, to make semiconductor manufacturers focus their next cycle of investment in the U.S. and other partner nations, the restrictions would apply for 10 years after the receipt of financial assistance, said the Act.

These measures obviously violate market rules and distort the global chain.

No matter how many countries try to shore up their local manufacturing bases, it will likely be virtually impossible to decouple from the global supply chain, particularly for products as integral and intricate as semiconductors, according to Zachary Collier, an assistant professor of management at Virginia's Radford University.

The design, fabrication, manufacturing and raw materials for chips are distributed across different countries and regions. "It's really a huge web," said Collier, adding that no matter how much countries try to localize production, a degree of interdependence is inevitable." It's global, one way or the other," he said.

Effects and endurance of the Act has also been doubted by experts. Hu Qimu, chief research fellow at the Sinosteel Economic Research Institute, said he doubts the Act will be able to block China's semiconductor development, as the cost to remodel the semiconductor industry and bring manufacturing back to the U.S. far exceeds the funding offered by the U.S. government.

"The research and development cost of integrated circuit is very high. The 52 billion USD can only be allocated to [a] very limited number of enterprises for rebuilding production facilities, maybe only one or two," said Hu.

In comparison, customs data showed that China has imported chips valued about 440 billion USD in 2021, far exceeding the amount of subsidies the U.S. plans to give to companies to help them restructure industrial chains.

Experts also said that the impact of the Act would be limited to China's semiconductor sector. More importantly, it would be a great chance to boost the growth of China's electronic-design-automation suppliers.

To artificially isolate China from the global chain or set up barriers to normal sci-tech exchange and cooperation between China and the U.S., obviously, won't work. It will definitely turn back the wheel of history and impede global tech development.

China has no intention to replace the U.S. Both China and the U.S. stand to gain from cooperation and lose from confrontation. Tech war is not the answer, peaceful co-existence and mutually beneficial cooperation is.