Mon, May 15, 2017 - Page 15 News List

China’s plans to boost semiconductor capacity threaten US dominance: Ross


US Secretary of Commerce Wilbur Ross sees the US semiconductor industry as still dominant globally, but said he is worried that it will be threatened by China’s planned investment binge to build up its own chipmaking industry.

Ross told reporters in an interview last week that his agency is considering a national security review of semiconductors under a 1962 trade law because of their “huge defense implications,” including their use in military hardware, and proliferation in devices throughout the economy.

He has launched similar “Section 232” reviews of the US steel and aluminum sectors, where a flood of imports, especially from China, has depressed prices, threatening the industries’ long-term health.

The probes could lead to broad import restrictions on the metals and the administration of US President Donald Trump could potentially take similar actions based on the findings of a semiconductor investigation.

“Semiconductors are one of our shining industries, but they have gone from substantial surplus to the beginnings of a deficit,” Ross said. “China has a US$150 billion program to take that much further between now and 2025. That is scary.”

Ross was referring to China’s plans for massive state-directed investments in semiconductor manufacturing capacity under its “Made in China 2025” program, which aims to replace mostly imported semiconductors with domestic products.

Ross’ predecessor at the US Department of Commerce, Penny Pritzker, in November last year warned about looming market distortions if China builds too much semiconductor capacity.

Ross said that while he understands Beijing’s logic in developing its domestic chip industry, “that’s going to be a struggle” from a US trade standpoint.

Meanwhile, US semiconductor makers have other ideas about how to secure their future.

Their major trade group, the Semiconductor Industry Association (SIA), advocates open trade and increased access to international markets, which buy 80 percent of US-made semiconductors.

US chipmakers also depend on a complex global supply chain and have nearly half their production capacity located overseas.

“So while we fully support efforts to ensure trade in semiconductors is fair and market-based, we do not believe a Section 232 investigation is the right tool to be applied to our industry” SIA president John Neuffer told reporters.

One area where there appear to be some differences is how to define the industry’s trade balance.

Department data showed that “semiconductors and related device manufacturing” had a trade deficit of US$2.4 billion last year, with exports of US$43.1 billion and imports of US$45.6 billion.

However, that category includes rapidly growing imports of non-semiconductor devices including solar cells and light-emitting diodes as well as some raw materials.

In a submission late on Wednesday to the department for a study on trade deficits, SIA said that excluding the non-semiconductor products shows the sector had a US$6.4 billion trade surplus last year, with exports of US$41.3 billion and imports of US$34.9 billion.

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