Thursday, February 29, 2024

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    Experts urge US to adjust policy on China as chip supply chain disrupted

    Automakers around the world are shutting down production lines due to chip shortages caused by the novel coronavirus pandemic and US sanctions imposed on Chinese semiconductor companies under the Trump administration.

    Almost all international car brands, including Ford, Volkswagen, Nissan, Toyota, and Chrysler, have been forced to slow down on their assembly lines since the last quarter of 2020. With chip stocks running out, the situation is getting worse, according to industry connoisseurs.

    The auto industry was the first to suffer from this chip shortage, as automobiles are increasingly controlled by software and the industry has become a heavy consumer of chips.

    The main engine of global economic growth, the automotive industry directly employs more than 10 million people and tens of millions more in the automotive service sectors. In addition, this industry consumes huge amounts of raw materials including steel, aluminum, plastics, glass, rubber, and petroleum, making it an important driver for these sectors.

    It is widely believed that the administration of new US President Joe Biden should review and adjust US policy towards China, which is causing disruption in the global supply chain, not only in the automotive industry but also in a large number of other sectors, such as telecommunications and consumer electronics.

    The current US administration should avoid a protectionist approach, the experts insisted.

    In 2020, the Trump administration sanctioned a number of Chinese high-tech companies citing so-called “national security” reasons and the need for a “clean grid”, notably semiconductor producers SMIC and Huawei.

    These measures have been widely criticized. Jeremy Mark, a former communications adviser, and speechwriter at the International Monetary Fund (IMF) saw the sanctions as short-sighted.

    “The measures targeting minimum wage could significantly affect the global ecosystem of semiconductors which has developed over the past 30 years,” he wrote in an article published at the end of September on the Atlantic Council website. According to him, “supply chain disruptions will consume years of work and vast sums of money.”

    According to statistics, China accounted for more than 50% of global semiconductor consumption in 2019.

    Experts have also warned that US technology restrictions and trade barriers targeting China could backfire on the United States, as the country could risk losing the Chinese market, something no big business in the world can afford.

    For example, Apple said on Thursday that its revenues in Greater China increased 57% to $ 21.3 billion in the last quarter of 2020, or more than 20% of its total revenues.

    U.S. semiconductor maker Qualcomm got an even larger share of its revenue from the Chinese market, nearly 67% of its total revenue in 2020.

    A study by the Boston Consulting Group published in March 2020 showed that the United States could lose 18 percentage points of market share and 37% of its global revenues if it “completely forbids semiconductor foundries from selling to Chinese customers, thus causing a technological decoupling from China “.

    Even if the US government maintains the current restrictions, it could still cost the US industry 8 percentage points of market share and 16% of revenue, according to the study.

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