White House rejects Intel's plan to boost chip production in China

WASHINGTON • The Joe Biden administration has spurned a plan by Intel to increase production in China over security concerns, dealing a setback to an idea pitched as a fix for US chip shortages, according to sources familiar with the deliberations.

Intel, the world's largest chipmaker, has proposed using a factory in Chengdu to manufacture silicon wafers, said the sources, who asked not to be identified because the discussions were private.

Production could have been online by the end of next year, helping to ease a global supply crunch. But at the same time, Intel has been seeking federal assistance to ramp up research and production in the United States. When presented with the plan in recent weeks, Biden administration officials strongly discouraged the move, the sources said.

The situation underscores the challenges of the chip shortage that has hobbled the technology and auto industries, cost companies billions in lost revenue and forced plants to furlough workers.

In a statement, Intel said it remains open to "other solutions that will also help us meet high demand for the semiconductors essential to innovation and the economy".

"Intel and the Biden administration share a goal to address the ongoing industrywide shortage of microchips, and we have explored a number of approaches with the US government," the company said.

"Our focus is on the significant ongoing expansion of our existing semiconductor manufacturing operations and our plans to invest tens of billions of dollars in new wafer fabrication plants in the US and Europe."

A representative for the White House declined to comment on specific transactions or investments, but said the administration is "very focused on preventing China from using US technologies, know-how and investment to develop state-of-the-art capabilities", which could contribute to human rights abuses or activities that threaten US national security.

Separately, China has been pushing US executives, companies and business groups in recent weeks to fight against China-related Bills in the US Congress, four sources familiar with the initiative told Reuters, in letters to and meetings with a wide range of actors in the business community.

Letters from China's embassy in Washington have pressed executives to urge members of Congress to alter or drop specific Bills that seek to enhance US competitiveness, according to the sources and the text of a letter sent by the embassy's economic and commercial office seen by Reuters.

Chinese officials warned companies that they would risk losing market share or revenue in China if the legislation becomes law, according to the text of the letter.

BLOOMBERG, REUTERS