China Instantly Bites Back in Semiconductor Battle With Joe Biden

China is set to hit back against President Joe Biden’s plan to undercut the country’s semiconductor industry with a new initiative.

“The Ministry of Industry and Information Technology asked carmakers this year to expand their buying of homegrown components to accelerate the adoption of Chinese chips, according to people familiar with the matter,” Bloomberg reported on Friday, citing Chinese government sources.

This directive aligns with China’s ambitious goals to achieve technological supremacy and reduce vulnerabilities in its supply chain. China’s move to bolster its domestic chip industry reflects the strategic importance of semiconductors in achieving geopolitical leverage against the U.S.

The development came just before Biden is set to announce a new Intel Corporation semiconductor chip production plant in the U.S. next week.

This initiative, aimed at expanding U.S. chip production domestically, will be unveiled next week in Intel’s Arizona semiconductor plant, according to Reuters. This development is part of the U.S. government’s broader effort to secure its technological and economic sovereignty amid increasing competition with China.

As the global semiconductor battle intensifies, the U.S. and China are taking decisive steps to secure their positions in the industry. These actions reflect the strategic importance of semiconductors in modern economies and underscore the broader geopolitical tensions between the two superpowers.

Beijing and Washington are competing to shore up the domestic semiconductor industry by offering large subsidies to their companies.

Intel will receive financial assistance as part of the U.S. CHIPS and Science Act 2022.

“Intel’s award, a mix of grants and loans, will be the most significant to be rolled out so far from the 2022 CHIPS and Science Act, America’s bid to boost domestic semiconductor output with $52.7 billion in funding, including $39 billion in subsidies for semiconductor production and $11 billion for R&D,” Reuters reported.

Last month, the Biden administration also allocated $1.5 billion to GlobalFoundries, signaling a continued commitment to revitalizing the U.S. semiconductor landscape.

According to Bloomberg, the Chinese government has subtly directed electric vehicle manufacturers, including industry giants BYD Co. and Geely Automobile Holdings Ltd., to augment their procurement from local auto chipmakers significantly.

This strategy aims to diminish China’s dependence on Western imports while fostering its burgeoning semiconductor sector. China’s Ministry of Industry and Information Technology has been instrumental in this push, urging carmakers to prioritize homegrown components to expedite the integration of Chinese chips into the market, Bloomberg reported.

The rivalry extends beyond investments and subsidies. The U.S. is actively investigating the cybersecurity risks associated with internet-connected cars from China, including electric vehicles.

Secretary of Commerce Gina Raimondo has highlighted concerns over the potential for data collected by these vehicles to be accessed by Beijing, hinting at the possibility of imposing sales restrictions in the U.S. that could extend beyond tariff increases, Bloomberg reported.