The news: China is opposing the Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act, which releases $52 billion to subsidize US semiconductor production, per Bloomberg.
The CHIPS Act’s big caveat: The law specifies that companies accepting US federal subsidies will be restricted from making any "significant transaction" to materially expand their chipmaking capacity in China or any other foreign country of concern for 10 years.
Brewing opposition: “We resolutely oppose the US’ restrictive actions targeting certain countries,” said Yu Xiekang, vice chairman of the China Semiconductor Industry Association during an industry conference in Nanjing.
“It contains essentially discriminatory clauses in market competition and creates an unfair playing field, which goes against the WTO’s fair-trade principles,” he added.
Representatives of China’s Foreign Ministry reportedly called the legislation “economic coercion,” saying it would hinder innovation, per Nikkei Asia.
What’s the catch? "I don't think China has any good immediate policy options at this point," said Xiaomeng Lu, director of Eurasia Group's geo-technology practice. "China essentially doesn't have the technology to create those [chip] fabs."
What’s next? The passing of the CHIPS Act takes place at a time when China’s leadership is increasingly frustrated with its years-long failure to develop semiconductors that can replace US circuitry, despite allocating more than $100 billion to the sector.
This article originally appeared in Insider Intelligence's Connectivity & Tech Briefing—a daily recap of top stories reshaping the technology industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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