US sanctions force China chipmakers to focus on older-generation designs

US sanctions force China chipmakers to focus on older-generation designs is profiled by BTW Media because public-source evidence links it to internet infrastructure, governance, operational dependencies, or market visibility.

• The EU has started a consultation with the semiconductor industry to evaluate China’s increased production of older-generation chips.
• China’s focus on legacy chip production, due to US restrictions, raises concerns in the West about long-term oversupply issues.

OUR TAKE
China’s focus on legacy chip production is a temporary relief that cures the symptoms but not the disease. China‘s priority should be to innovate in chip-making so that no sanctions can threaten China’s development.
–Ashley Wang, BTW reporter

What happened

The European Commission has initiated a consultation with the semiconductor industry across the region to gather opinions on China’s increased production of older-generation computer chips, according to two sources. This action precedes two voluntary surveys targeting the chip industry and major chip-utilizing companies, set for September. A Commission spokesperson confirmed the consultation aims to further evaluate the role of legacy chips in supply chains.

The EU is planning for broader measures, and the feedback is only a part of it. The EU claims to safeguard its industries from Chinese competition. However, its cooperation with the US, both asserting to manage dependencies and market distortions, aggravates tensions between China and the EU. Notably, the Commission has recently imposed provisional tariffs of up to 37.6% on Chinese electric vehicles, signaling a potentially tougher EU stance on Chinese trade practices.

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Why it’s important

Chip production has troubled China for a long time. This focus stems from restrictions led by the US, which limit China’s access to advanced chip technology. In the short term, this investment reduces China’s reliance on foreign chips. However, Western governments are concerned about long-term impacts, such as oversupply issues affecting numerous industries, including automotive and consumer electronics. The EU’s consultation portends a tougher road ahead for China on the chip issue.

For European tech firms like ASML, China’s legacy chip production expansion presents revenue opportunities, mitigating US export restrictions on advanced technology. However, chipmakers like Infineon, STMicroelectronics, and NXP face mixed outcomes, balancing increased competition from China with business interests in the Chinese market.