China's trade and commerce associations have described the US government's semiconductor bill as a barrier to global innovation and economic recovery. They further urge business communities to take measures to protect their interests and mitigate the impact of the new bill.

Signed into law on Tuesday, the US Chips and Science Act seeks to boost the country's semiconductor manufacturing industry and pump investment in research and development, science, and technology. It includes$52.7 billion in subsidies and funds aimed at fuelling the domestic manufacturing sector and strengthening the country's footprint in emerging sectors, such as nanotechnology, quantum computing, and artificial intelligence (AI). 

Following US President Joe Biden's signing of the bill this week, various market players have stepped up to announce plans to invest in the local market. According to the Biden administration, these included Micron's$40 billion funds injection into memory chip manufacturing that was projected to create up to 40,000 jobs and push the US market share of memory chip production to 10%, up from less than 2%, over the next 10 years. 

Qualcomm and GlobalFoundries also unveiled a new partnership that included plans to invest$4.2 billion in the expansion of GlobalFoundries' New York chip manufacturing site. Qualcomm said it would boost its domestic semiconductor production by up to 50% over the next five years. 

In advocating the role of the new bill, the US government said it would help cement the country's leadership in a technology that was the "foundation of everything", spanning automobiles, defence systems, and household appliances. 

"America invented the semiconductor, but today produces about 10% of the world's supply and none of the most advanced chips. Instead, we rely on East Asia for 75% of global production," said the White House. "The Chips and Science Act will unlock hundreds of billions more in private sector semiconductor investment across the country, including production essential to national defence and critical sectors."

The new bill also would ensure the US maintained and advanced its scientific and technological edge, the government said. Noting that federal investments in R&D was 2% of the country's GDP in the mid-1960s, the Biden administration said this figure had dropped to less than 1% in 2020. 

"Economic growth and prosperity over the last 40 years has clustered in a few regions on the coasts, leaving far too many communities behind," it said, adding that the Chips and Science Act would "unlock opportunities" in science and technology for those who had been left out.

US bill unfair on global competition

China, however, said the US bill would distort the global chip supply chain and disrupt international trade. The Chinese Ministry of Commerce last month said the Act contained provisions that restricted "normal economic, trade, and investment" activities of Chinese market players. 

The ministry said it would monitor the implementation of the bill and adopt "strong measures" to protect its legitimate rights and interests. 

In a joint statement released Wednesday, the China Council for the Promotion of International Trade and China Chamber of International Commerce reiterated the Chinese government's criticisms, noting that the US bill would hold back global economic recovery and innovation.  

The new law served to boost the US's advantage in the chip market and triggered unfair competition against "any country of concern", reported state-owned newspaper China Daily. 

The Chinese trade associations said the bill gave the US government power to force changes in the global semiconductor labour market, specifically, through subsidies and investment tax credits on equipment manufacturing to incentivise companies to build factories in the US. This would have adverse impact on international companies, including those in China and the US, the Chinese associations said. 

They added that such provisions were not in line with the World Trade Organisation's "non-discrimination principles" and identified specific countries as key targets, forcing companies to adjust their global development strategies. 

The trade associations said pushing technologies to be produced in the US would restrict fair participation with international market players. They further urged the global business community to band together and mitigate the impact of the US bill as well as adopt measures when necessary to protect their legitimate rights and interests. 

In its note on the US Chips and Science Act, consulting firm PwC said subsidies provided under the bill offered a "necessary cushion" for semiconductor companies to plug the talent gap and and diversify their workforce as well as provide opportunities to make changes in digital manufacturing and relevant workforce skills. These potentially could play an integral role in reducing the size and power of chips while increasing performance.

However, the funding carried new geographical manufacturing restrictions, PwC said, noting that the US bill prohibited companies from using the subsidies to fund chip manufacturing expansions in China and other countries identified as a potential national security threat.

The consulting firm advised companies looking to tap the subsidies to assess their global operations and be mindful of key issues at play, including ensuring their global R&D and manufacturing activities complied with the Act's geographical restrictions. They also might need to identify new partners in their supply chain, including backend assembly, testing, and device packaging, and determine if it would be more cost-efficient to expand their production capacity in the US, instead of establishing foundry partnerships. 

PwC said: "The Chips Act may present semiconductor companies with an opportunity, but realising its potential will require a rethinking of global strategy as well as a plan for digital transformation, capital project management, and financial planning. Geopolitical uncertainty, combined with recent dramatic shifts in the market, requires companies to make careful assessments about their place in the semiconductor value chain and how they can improve their position."

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