A marginally conciliatory tone was struck between the US and China upon the conclusion of Treasury Secretary Janet Yellen’s recent four-day visit. It is a step in a better direction in the ongoing relationship.
Another way to put it: No really bad news is good news at this point, which should make US chipmakers feel a bit at ease. However, there are still many challenging issues and divergent interests to work through to get to a mutually agreeable and positive reset of trade relations.
It’s clear that national security concerns will continue to color trade relations between the US and China, especially for semiconductors and, more broadly, electronics. China seems to have used Secretary Yellen’s visit as a way to shape the tone of tech trade discussions going forward between the two countries.
In the process, China is making their own national security concerns more broadly known. Of course, these “national security” policy actions by China will be and are perceived by Washington as punitive actions against the US chip industry and chipmakers-- specifically, Micron Technologies. We have certainly heard similar retorts from the Chinese regarding US restrictions and sanctions against Chinese firms.
It seems that Beijing wants Washington to know that it is not short of recourse and consequence in the US-China Chip War as it has been dubbed. While China’s recently announced intent to restrict rare earth metals exports might have come as a surprise to policymakers in Washington, this is a move I have long expected. I had thought they might pull the trigger on this earlier to preempt some of the Biden Administration’s more recent chip sanctions on China.
Beijing has more cards to play, which should and does concern US chipmakers (as well as those of chip-making allies such as Taiwan, Japan, and South Korea) who continue to have significant business and dependencies on the Chinese market itself. It’s a certainty that Beijing will make these levers of negotiation known before dialog begins in earnest to reset relations with the US.
I think Washington has a negligible chance of convincing Beijing that de-risking is not targeted or measured decoupling that will have detrimental impact on China’s economy, its global trade, and its industrial and technological competitiveness. It’s likely that the Chinese government will continue to regard de-risking as a call by the US for its companies and those of allied partners to move out of China and ban Chinese businesses from their markets. It’s also clear that Beijing will exercise any means it has at its disposal to put at risk and destabilize the US semiconductor supply chain resiliency thesis.
There is no doubt that the new status quo of a stable US-China trade relationship and economic partnership will look much different than before. There is a very long way to go to get to good, but the US semiconductor industry and chipmakers will welcome trade stability between the US and China in whatever modest shape and form possible in the interim.
Leonard Lee is the founder and managing director of neXt Curve, a research advisory firm focused on Information and Communication industry and technology research. He has worked as an executive consultant and industry analyst at Gartner, IBM, PwC and EY and has advised leading companies globally on competitive strategy, product and service innovation and business transformation. Follow Leonard on LinkedIn: linkedin.com/in/leonard-lee-nextcurve
“Industry Voices” are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by Fierce staff. They do not represent the opinions of Fierce.
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