New Delhi: A US Congressional Select Committee Monday raised the spectre of China flooding the American market with legacy semiconductors and called on the government to take action to prevent such a situation at the earliest. The push comes amid the US’s actions to prevent China access to advanced semiconductor technology in the past over a year.
Representative Mike Gallagher, the Republican chairman of the House Select Committee on the Chinese Communist Party and Representative Raja Krishnamoorthi, the Democratic ranking member on the committee, jointly sent a letter to Gina Raimondo, the US secretary of commerce and Katherine Tai, the US trade representative, calling on them to “stem” America’s reliance on Chinese legacy or foundational semiconductors.
“We are concerned that the People’s Republic of China (PRC) is on track to flood the United States and global markets with foundational semiconductors…Foundational chips are the lifeblood of a modern economy and a modern military” the two said in the joint letter that was shared by the committee on the social media platform X (previously Twitter).
A “legacy” or foundational semiconductor is defined as semiconductor technology that is of the 28 nanometer (nm) generation or older (or larger), according to the CHIPS and Science Act signed into law by US President Joseph R. Biden Jr. in August, 2022.
In August, 2023, Biden invoked a national emergency preventing US companies investing in Chinese high-end technology sectors — semiconductors, microelectronics, quantum information technologies and artificial intelligence. The focus of the Biden administration has been on preventing Beijing from accessing “cutting-edge” technologies, as reported by ThePrint earlier.
However, the question of legacy or foundational chips has so far been outside the remit of US governmental action, a fact highlighted by Gallagher and Krishnamoorthi in their joint letter.
“While the administration has taken strong action to ensure US advanced semiconductor technology is not transferred to the PRC, far less attention has been given to the risk that a surge of PRC-made foundational chips pose to US economic security,” the letter said.
Mao Ning, a Chinese foreign ministry spokesperson, called the US’s attempts to tighten control over chip exports as “out-and-out economic bullying” that it is taking a toll on global supply chains.
“The US uses national security as a pretext to restrict chip export to China, but the measures it has taken clearly go beyond the realm of national security and have gravely hindered the normal trade of ordinary chips for civilian use…The US has been asking certain countries to join itself in curbing Chinese companies. This has nothing to do with security. This is pure economic coercion,” said Mao during a press conference Monday.
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Chinese production capabilities in legacy chips
China is building significant production capabilities for these legacy chips that are found in sensors, power semiconductors and microcontrollers, found in everyday electronic consumer goods, vehicles and medical devices, according to a study published in April last year by Rhodium Group, an independent research provider.
China and Taiwan produce a combined 80 percent of chips between the sizes 20 nm and 45 nm. For chips between the sizes of 50 nm to 180 nm, China and Taiwan account for 70 percent of the global production according to the study by Rhodium Group.
In the next three to five years, the capacity for 50 nm-180 nm chips China alone would be operationalising would be equivalent to that of the rest of the world during this time period, according to Rhodium Group. This highlights its efforts to expand its production of legacy chips.
“Of the new or major expansions of semiconductor fabrication planned between 2022 to 2026 at 300 nm, the PRC leads the world with 22 projects, while North America is stuck at 10,” Gallagher and Krishnamoorthi highlighted in their letter.
According to data made available by the Rhodium Group report, of the announcements for investments in new semiconductor fabrication facilities in March 2023, China and Taiwan alone accounted for 60 percent of the total manufacturing capacity for 20 nm to 45 nm chips.
China alone controls 30 percent of 50 to 180 nm manufacturing capacity globally and within the next decade, and if the new investments are operationalised, Beijing could account for 46 percent of the total global capacity according to Rhodium Group.
In early 2023, the US had reportedly negotiated an agreement with Japan and the Netherlands to restrict the export of tools needed to produce chips at 14 nm in size or smaller. Such chips are used in critical technologies.
Calling larger chips as “legacy” is a misnomer, as innovation continues in the production of these chips, including the use of silicon carbide semiconductor chips which is expected to have an important role in decarbonising the economy, according to a study published by the Centre for Strategic and International Studies (CSIS), a Washington D.C. based think tank.
The importance of legacy chips
During the Covid-19 pandemic and in its immediate aftermath, a global shortage existed in the supply of semiconductors. A US Department of Commerce survey released in 2022 found that the most acute shortages were found in legacy chips of 40 nm in size or larger, not in cutting-edge chips.
According to the CSIS study, 95 percent of the total semiconductor consumption in the US automotive industry comprise legacy chips, leading to a cut of 4.3 million vehicles from its production during the COVID-19 shortage in these chips.
In 2021, Apple was reportedly forced to curtail its production plans for iPhones and other devices because of the shortages of these chips, further highlighting the importance of legacy chips to everyday consumers.
A 2021 review of semiconductor manufacturing by the Biden administration noted that the US relies primarily on Taiwan, the Republic of Korea (RoK) and China for the production of legacy chips and Taiwan specifically for cutting-edge chips.
“The share of semiconductor manufacturing capacity on US soil has fallen from 37 percent 20 years ago and stands at about 12 percent of the global production…The United States lacks sufficient capacity to produce semiconductors,” the review noted.
(Edited by Poulomi Banerjee)
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