The European Commission has reportedly begun seeking opinions from the semiconductor industry in EU countries regarding China’s expansion of production of older generation computer chips. The opinions sought include sources of chips for EU industrial enterprises, product information from chip companies, and pricing information.
This move aims to formulate measures to prevent the influx of low-end Chinese chips into the European market.
A spokesperson for the EU confirmed on Friday that the Commission has started “targeted consultations with the industry to further assess the use of traditional process chips in the supply chain.”
The EU Commission issued a feedback request notice before conducting two voluntary surveys on the chip industry and major chip-using enterprises. Feedback is expected to be collected by September this year.
It is currently unclear what actions these EU measures will ultimately lead to, but as Brussels seeks to protect its industries from Chinese competition, tensions between it and the Chinese government are escalating.
A European Commission spokesperson said in an email response to Reuters that the EU and the United States may “decide to take joint or cooperative measures to address (the EU’s) dependence on China or (distortive effects of Chinese policies).”
Traditional process chips generally refer to the previous generation of chips above 28 nanometers. While they may not compare in functionality to advanced process chips of 7nm or 5nm, they are widely used in everyday tech products such as cars, washing machines, and medical equipment. China dominates in the production and market of such chips.
With the help of state subsidies, the Chinese industry is investing heavily in expanding production of traditional process chips, partly due to restrictive measures led by the United States that limit their purchase or production of more advanced computer chips. In the short term, this can reduce dependence on foreign chips. The EU is concerned that an oversupply of traditional process chips produced in China may increase EU’s reliance on Chinese chips.
In September last year, Beijing announced the establishment of a $40 billion national investment fund to strengthen semiconductor production. This move by the Chinese government has raised concerns among industries of Western countries, urging their governments to take action to support domestic chip manufacturers.
In April this year, Margrethe Vestager, Executive Vice President of the European Commission in charge of antitrust matters, stated after a meeting in Belgium with US Commerce Secretary Gina Raimondo that the institution may investigate traditional process chips.
For major tech companies in Europe like ASML, equipment suppliers, China’s expansion of traditional process chip production presents a significant source of revenue for them, helping mitigate the impact of US-led export restrictions on more advanced technology.
For chip manufacturers like Infineon in Germany, STMicroelectronics in Italy, and NXP in the Netherlands, the situation is mixed. They are all significant manufacturers of chips for cars and electrical infrastructure, facing increasing competition from China but also conducting business in China.
European industrial, aerospace, automotive, medical technology, and energy companies may be reluctant to disclose their use of Chinese traditional process chips. Given the cross-border, multi-step nature of chip manufacturing and packaging, they may also be unsure where the chipsets they use are manufactured.
Following a costly chip shortage during the COVID-19 pandemic, German car manufacturers are seeking to diversify their chip suppliers, including manufacturers from mainland China and Taiwan.
Despite the US government’s ban on NVIDIA exporting high-end chips to China in 2022, Chinese buyers are still evading US export controls through the underground network, circumventing blind spots in the supply chain, and purchasing NVIDIA’s advanced artificial intelligence (AI) chips through overseas smuggling channels.
According to a report by The Wall Street Journal on July 2, an overseas underground network composed of buyers, sellers, and couriers is bypassing US government restrictions on NVIDIA chips, providing high-level NVIDIA chips to research institutions, technology companies, and others in China like Tsinghua University and the Chinese Academy of Sciences.
(References from Reuters)