US decoupling is the real danger to global chip supply chain
Published: Sep 28, 2021 08:55 PM
Illustration: Tang Tengfei/Global Times

Illustration: Tang Tengfei/Global Times

The recent power outages in many areas of China have attracted widespread attention from foreign media outlets. Some of them overly exaggerated the supply shortage; others have mistakenly linked it to problems that plague the global supply chain. 

For instance, The Wall Street Journal said on Tuesday that power cuts in parts of the global manufacturing center may pose a further "threat" to already tight global supply chain of semiconductors and other important commodities.

The report is riddled with misunderstandings about the complex reasons behind current restrictions on electricity use in many parts of China. It has clearly overemphasized the relevance of rising coal prices in Australia.

The reasons behind the power shortages in China are very complicated and in many instances specific to different parts of the country. There are factors of shortage of supply, the consideration of energy conservation and emissions reduction, and the consideration of adjusting the industrial structure. 

China only imported about 70 to 80 million tons of coal from Australia each year, accounting for 2 percent for China's total coal consumption. It has already been clearly demonstrated that China can easily replace Australian imports with alternative sources.

The current measures in many regions of China obviously have more to do with the consideration of reducing carbon emissions and promoting the upgrading and transformation of industrial structure. Official data show that as of the end of May, China's installed power generation capacity was 2.24 billion kilowatts, which is sufficient for China's total electricity consumption needs.

At the same time, in order to fulfill its carbon emissions reduction targets, China's efforts to promote clean energy are also advancing rapidly. Among the country's total installed power generation capacity as of May, installed wind power capacity accounted for 290 million kilowatts, a year-on-year increase of 34.4 percent; installed solar power capacity was 260 million kilowatts, a year-on-year increase of 24.7 percent.

As for the impact on the global chip supply chain, this is even more far-fetched. Although the recent power outages in East China's Jiangsu Province and other regions will indeed affect the production of many Chinese companies in the global chip industry, it will not significantly aggravate the current global chip supply shortage.

The reasons for the current global chip supply shortage are complex, but one of the most important artificial factors is the decoupling measures taken by the US. The Trump administration arbitrarily imposed restrictions to China's tech sector, including chip supply bans on Chinese technology giant Huawei and has continuously strengthened its crackdown on Chinese chip manufacturers. This has seriously disrupted the supply chain originally formed in the global semiconductor industry. Currently, the pain of the chip shortage has gotten back to the US itself in turn.

The new US administration is continuing with Trump's decoupling policy. In April, US President Joe Biden held a video conference with senior executives of many companies in the semiconductor sector. The focus of the meeting was to solve the problem of semiconductor shortages in the US, and to rebuild the semiconductor supply chain and restore the US' global leadership in the semiconductor field.

This highlights the malicious purpose of the Biden administration's efforts to decouple from China across the entire semiconductor industrial chain from design to manufacturing to application. And this is the real source of chaos that further disrupts the already tight global supply chain of semiconductors and other important commodities.

If the US cannot accept the progress of China's technology development, or cannot correctly handle technological competition with China, and insists on racing down the road of decoupling, it will seriously damage global industrial chains and its own domestic interests. 

According to the US Chamber of Commerce, if China-US semiconductors are fully decoupled, the US stands to lose $120 billion. It is hoped that the US can halt its interference in the global semiconductor supply chain, so as not to bring about disastrous consequences to the global chip industry.

The author is a veteran smartphone industry analyst.