US, not China, to blame for worsening global chip glut
Published: Jul 27, 2023 07:43 PM
chip Photo:VCG

chip Photo:VCG

US Commerce Secretary Gina Raimondo on Wednesday warned of a glut of semiconductor chips due to "China's aggressive industry subsidies," according to Bloomberg. Raimondo further claimed that a combination of export controls and domestic incentives will help the US chip industry to fight the glut.

For anyone who has been closely following the US' relentless restrictions and protectionist moves in the field of semiconductor, it should crystal clear what the US Commerce Secretary said is complete nonsense.

US officials are used to blame China for everything and try to find more excuses to justify its semiconductor export controls and similar failed policies. But none of these can conceal the truth: A series of wrong policies devised by the US to suppress the development of China's semiconductor industry are the root cause of the chip glut problem, which have evidently posed serious risks for US chip companies. Worse yet, they are not only trying to shift blame for their failed policies, but actually trying to find more excuses to further intensify export controls, which needless to say is to "quench thirst with poison."

Any further US restrictive or protectionist move will only add to the chip glut problem and cause more damages for global chip companies, including those in the US, which are already reeling from the US actions. In recent days, the second quarter revenue data released by some global semiconductor giants showed that they are still grappling with a lingering semiconductor chip glut as demand is not expected to recover anytime soon and the disruptive effect of US export controls on global supply chains will continue to be felt.

Samsung Electronics reported on Thursday a 95-percent plunge in quarterly profit, as the semiconductor industry's unprecedented downturn persisted despite output cuts due to weaker demand for products reliant on semiconductors, according to media reports. 

Although US chip companies such as Intel and Micron have not released their revenue data for the second quarter, the US chip industry has suffered huge losses in this round of glut. Against the backdrop of persistently sluggish demand, US companies have had to deal with the double whammy of lower sales and lower prices.

For instance, Intel in May reported its largest quarterly loss in company history, reporting a year-on-year1 33-percent decline in earnings per share in the first quarter of 2023. Quarterly revenue fell 36 percent year-on-year to $11.7 billion.

One of the main reasons for the disorder of the industrial chain from supply shortage to glut in recent years is the US' ill-intentioned containment campaign against China. The US bans not only its own chip companies, but also companies from other countries from selling chips and related products to China. 

The US is also deliberately trying to disrupt the established global semiconductor manufacturing supply chain for the benefit of its own industry. By doing so the US attempts to exclude China, the largest semiconductor market and global manufacturing hub, from the semiconductor supply chain and coerce semiconductor companies to set up factories in the US in order to establish a new US-led semiconductor supply chain.

The reason why the Chinese market is crucial for a global semiconductor recovery is that China is the world's largest purchaser of chips. In 2022, China reportedly accounted for about 60 percent of worldwide semiconductor sales. Clearly, companies that can get more market shares in the Chinese market are better positioned to cope with the current predicament.

Rather than rectifying its wrong deeds, the US has continued to increase chip restrictions. That will only lead to greater losses for the US chip industry. Even if it adopts domestic incentive subsidies, it will not be able to boost its chip manufacturing or find an alternative market on par with China.

Meanwhile, in the face of a continuous crackdown by the US, China's chip industry will not sit idly by. It has been trying all means to break the US' containment. China's chip industry chain is advancing on multiple fronts despite US restrictions. For instance, Chinese high-tech enterprise Wuhan Huagong Laser Engineering has recently produced China's first high-end wafer laser cutting equipment with fully localized core components. That is another breakthrough that shows the US' tech blockade is not only ineffective but has actually backfired.

If the US government really wants to help the US chip industry to address the glut, it should remove artificial restrictions on chips as soon as possible. If the US continues on the wrong path of introducing ever more restrictions and protectionist moves, it will only further undercut its own chip industry.  

The author is a reporter with the Global Times.