China's chip execs worry US will target them next

NANJING • Dozens of senior Chinese government officials and business leaders gathered at the 2020 World Semiconductor Conference in Nanjing, but their usual agenda of trumpeting the nation's chip innovation was coloured by fears that their industry might be next to suffer trade sanctions from the Trump administration.

The White House's campaign to contain China's tech ascendancy has already shaken up the world's technology supply chain and further restrictions would seriously set back China's still-developing chip industry, said executives including Mr Arthur Ge, managing director of Legend Capital - an investment arm of the parent of Lenovo Group - and Ainstec chief executive Wang Xuguang.

That was despite the resiliency in China's chip demand, which has been supported by a recovery in manufacturing following disruptions during the coronavirus pandemic.

The conference was held last week.

"If the US further hit key areas of Chinese tech industry, for example the advanced chip manufacturing, the impact would be devastating," said Mr Ge.

The White House last month slapped new restrictions on exports to Huawei Technologies amid an escalating stand-off between the world's two largest economies that has already ensnared other Chinese tech giants such as Tencent Holdings and ByteDance.

The latest American rules require any chip companies using US technologies to seek licences before working for Huawei, effectively closing off the loopholes that the Chinese corporation had explored after earlier curbs that threatened the survival of its chipmaking unit HiSilicon.

The United States is also considering new curbs on exports of semiconductor manufacturing equipment and associated software tools, lasers, sensors and other technology, Reuters reported last week.

Already, Synopsys, the Mountain View, California-based provider of electronic design automation tools, has suspended cooperation with Huawei following the US curbs, its China chairman Ge Qun said at the conference in eastern China's Jiangsu province.

"The entire chip industry is too fragile to defend itself. We are at least 20 years behind compared with Silicon Valley from scale and quality of talent to size of the ecosystem," said Mr Wang of Ainstec, a Suzhou-based company that develops 3D visual chips.

"If we can prosper (with the US), that's the best, but if the situation doesn't allow this to happen, we need to think what we have on our hands."

For its part, the Chinese government has stepped up efforts to defend domestic tech companies and increase the industry's self-sufficiency. Last month, it rolled out a series of measures that include tax breaks, tariff exemptions and investment incentives to bolster chipmakers and software producers.

Local corporations are also boosting investments in research and development, with state-backed Tsinghua Unigroup building a US$22 billion (S$30 billion) memory chip plant in the city of Wuhan.

Semiconductor Manufacturing International Corp (SMIC) recently completed a secondary listing in Shanghai, raising more than US$7.6 billion that would be used to develop next-generation chipmaking technologies to compete with rivals such as Taiwan Semiconductor Manufacturing.

Tsinghua Unigroup and SMIC, along with HiSilicon and Cambricon Technologies, are among a handful of home-grown firms that are engaged in advanced chip manufacturing.

"Although no one wants to say this, the world is approaching a new Cold War era. I'm afraid this trend will get stronger in the future," said Mr Li Xing, co-founder of Beijing-based private equity company V Fund and a former Goldman Sachs Group executive.

"However, the challenge could become an opportunity for the industry" as China seeks local replacements, he said.

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A version of this article appeared in the print edition of The Straits Times on September 01, 2020, with the headline China's chip execs worry US will target them next. Subscribe