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US Firms Divided Over China Investment Curb in Chips Bill

The funding puts the industry in the tricky position of pushing for grants but facing headwinds to investment in Chinese factories and financial backing of Chinese startups

This Reuters image shows a TSMC plant.


A bunfight has emerged over the Biden administration’s plan to grant $52 billion to chipmakers to expand operations in the United States because of an additional proposal that could block US chipmakers from making investments in China.

Companies are split on a new version of the House bill because some oppose controls being imposed on what they can invest in China.

“It would look hypocritical for companies to be begging for money, but refusing to allow government to have a say on whether they build new fabs in China,” an executive at a chipmaking firm said.

Another industry executive disagreed, saying companies could both support the funding and oppose the curb.

The funding puts the industry in the tricky position of aggressively seeking grants but facing headwinds to investment in Chinese factories and financial backing for Chinese startups should the bill pass with the controversial measure.


Intel Plan for Ohio, Chengdu Plants

At a White House event in January to announce plans to build a $20 billion chip plant in Ohio, Intel chief executive Pat Gelsinger said without government funding “we’re still going to start the Ohio site. It’s just not going to happen as fast and it’s not going to grow as big as quickly.”

The company is also seeking to expand production at a plant in Chengdu, China, but the Biden administration is allegedly cool on that idea. Intel declined to comment.

The outbound investment measure was originally proposed as a standalone bill by Republican Senators John Cornyn and Senator Bob Casey, but later added to the House version of a massive bill that includes grants for chipmakers and is aimed at countering China’s rise.

One industry source noted that it was important not to antagonise Cornyn, a strong supporter of the chip funding.

The Semiconductor Industry Association (SIA), which has been quiet on the provision, sent an email to its members last week seeking comment on a statement of principles describing the measure as “too broad,” and urging a separate legislative process for any curb on investment in China.

“The SIA encourages the development of policies that do not unnecessarily hinder non-sensitive, legitimate investment and related commercial activity,” the group wrote in the third version of the draft statement of principles, dated April 22 and toned down from a prior version.

“Prior to advancing outbound investment review policies, SIA encourages Congress to initiate a review process consisting of formal hearings, stakeholder engagement and committee consideration.” SIA declined to comment further.


Screening Move Unpopular

But the concept behind the measure has support within the Biden administration. Biden’s National Security Advisor Jake Sullivan said in July the government was working on new investment screening and considering outbound investment as it seeks to better position the United States for competition in technology.

However, Politico reported that the Treasury Department was working to weaken momentum in Congress for the measure, pushing lawmakers to approve a modest fact-finding pilot programme instead of new regulatory powers.

Business groups including the Chamber of Commerce have already voiced strong opposition to the legislative proposal, which would require the US Trade Representative to form a committee to evaluate the transactions and recommend to the president which ones pose a national security risk and should be blocked.

A study by Rhodium said 43% of US foreign direct investment transactions in China over the past two decades could have been subject to screening under the broad categories set out by the proposal.

The National Foreign Trade Council, whose members include Amazon, Facebook, Exxon and Chevron, has also circulated a draft letter to other DC lobbying groups expressing “strong opposition” the measure, and describing the creation of a new regulator as “unwarranted.”

“Creating a new interagency process will compound regulatory inefficiency and invite protectionism under the flag of national security,” the letter directed to House and Senate leaders of both parties said.


• Reuters with additional editing by Jim Pollard



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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


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