US Government May Allow Chipmakers to Expand Facilities in China

US Government has decided to allow chip manufacturers such as TSMC to expand their facilities in China, according to a report from The Wall Street Journal.

The Biden government now plans to allow chipmakers to continue their expansion in China after it was halted in October 2022 due to the sanctions imposed by the US. Under these sanctions, companies like Samsung, TSMC, and SK Hynix weren't allowed to export technologies and equipment to China in an attempt to thwart the Chinese industry's rapid growth. However, Alan Estevez, undersecretary of commerce for industry and security, told industrials about the government's intention to extend the existing waivers in US trade policy. Esteves said the exemptions would be renewed for the "foreseeable future."

Companies are bound to get an export license from the Department of Commerce for specific equipment being exported to China. This was introduced to halt the technology transfer within China and block off access to high-tech equipment. However, this has created problems for companies like Samsung and SK Hynix, whose facilities are located in China. Under CHIPS Act, companies can't invest or upgrade their facilities in China for ten years which isn't economically feasible considering such companies have a colossal consumer base in China. However, they will get massive funding from the US government in exchange.

Apart from the US, the government has also tried to prevent other countries from exporting technology to China. Allies such as Netherlands and Japan have also been included in the attempt to thwart Chinese semiconductor growth. Dutch company ASML, which specializes in EUV lithography equipment, has stopped supplying equipment to Chinese industries, significantly impacting their growth.

On the other hand, China has made efforts to go through the sanctions by encouraging local industry growth. Chinese chipmaker SMIC has plans to develop a 7nm process along with rapid expansion across the nation. However, China still has a long way to go for in-house production, and the sanctions have really affected the country's industrial and economic growth.

News Source: The Wall Street Journal