U.S. chip act another testament to Washington's economic coercion

BEIJING, Aug. 18 (Xinhua) -- U.S. President Joe Biden has recently signed the CHIPS and Science Act of 2022 into law in a bid to revive the country's sci-tech and chip sectors by offering incentives to chipmakers and forcing them to take side.

The thousand-page law is no more than a protectionist document. It has included terms limiting relevant companies' normal investment and trade in China and restricting China-U.S. sci-tech cooperation.

To achieve that hegemonic goal, Washington apparently does not care about jeopardizing the tottering globalization, or putting the global semiconductor industrial and supply chains on the line, revealing how unscrupulous the declining hegemon is when attempting to salvage its waning status.

However, as it runs counter to the laws of the market and international trade rules, the thinly-veiled economic coercion can hardly succeed in creating a boom in America's chip manufacturing industry.

In the short term, the huge subsidies promised by Washington, who has always accused others of subsidizing their industries for unfair advantages, may help U.S. domestic chipmakers to regain a foothold. But in the long run, the law does not tackle the root cause of the outflow the country's chip manufacturers in the past decades.

The crux of its problem is the high cost of production. The Semiconductor Industry Association, a Washington-based trade association that represents the semiconductor and microchip industries in the United States, disclosed that the 10 year total cost of ownership of a new lab in the United States is 30-50 percent higher than in East Asian economies.

If the United States really wants to bolster its chip industry, it should first focus on its comparative advantages and then further integrate itself into the global division of labor, instead of resorting to protectionism and economic coercion.

Otherwise, the claim by the U.S. president that the act will "make cars cheaper, appliances cheaper and computers cheaper" will be a pure delusion.

For chipmakers, the conditions attached to Washington's fundings are damaging. According to U.S. media, chipmakers that receive the subsidy will be prohibited from engaging in "significant transactions in China or other countries of concern" involving any leading-edge semiconductor manufacturing capacity for a period of 10 years.

With those conditions mainly targeting China, Washington is strong-arming chipmakers into making an either-or choice. The clear attempt to compulsorily restructure the global chip producing landscape will only split the world's chip industrial chain.

For an industry that relies on highly-efficient global coordination, the consequences of a paralyzed industrial chain are disastrous. And the U.S. chipmakers will definitely take the brunt of that.

If Washington pursued a hard technological decoupling and completely banned domestic semiconductor companies from selling to Chinese clients, U.S. companies would lose 18 percent of their global market share and 37 percent of their revenues, leading to the loss of 15,000 to 40,000 high skilled domestic jobs, said a recent article by the Center for Strategic and International Studies, citing a report by Boston Consulting Group.

However, to pursue its self-interests, Washington has disregarded all those perils the chip act may bring to the world, including hurting the interests of chip producers and customers within its own borders.

In fact, it is not the first time that the United States has weaponized technology issues and tried to form technology cliques to suppress others. As Chinese Foreign Ministry spokesperson Zhao Lijian has pointed out, such moves are classic technological terrorism.

Global observers have noted that China-U.S. economic and sci-tech cooperation serves the shared interests of both parties and contributes to the common development of humanity, and that creating restrictions and decoupling would hurt the common interests without benefiting anyone.

"American efforts to decouple for reasons of security and to keep a leadership role ignores the benefits for both and ability to tackle shared and global challenges," warned an editorial titled "U.S. should enhance, not sever scientific ties with China" published Monday by the South China Morning Post.

Washington should know better than that.