Proposed China investment curb by U.S. sparks debate among chipmakers
2022.04.29 13:27
FILE PHOTO: Semiconductor chips are seen on a circuit board of a computer in this illustration picture taken February 25, 2022. REUTERS/Florence Lo/Illustration/File Photo
By Alexandra Alper
WASHINGTON (Reuters) – Chipmakers are divided over how aggressively to oppose a legislative proposal that would give the U.S. government sweeping new powers to block billions in U.S. investment into China, according to documents seen by Reuters.
The measure is part of the House version of a bill that would also grant $52 billion to chipmakers to expand operations, a boon to the industry that has made some companies loath to forcefully oppose the package’s China investment controls.
But the “outbound investment” proposal could hamper those companies’ investments abroad, leading some chipmakers to advocate for aggressive opposition to its inclusion in the chips bill being hammered out by Senate and House lawmakers.
“It would look hypocritical for companies to be begging for money, but refusing to allow government to have a say on whether they build new fabs in China,” said one executive at a chipmaking firm.
Another industry executive disagreed, noting that chipmakers could both support the funding and oppose the curb. “We can walk and chew gum at the same time,” he said.
The funding puts the industry in the tricky position of aggressively seeking the grants but facing headwinds to their foreign direct investments in Chinese factories and financial backing of Chinese startups should the bill pass with the controversial measure.
At a White House event in January to announce plans to build a $20 billion chip plant in Ohio, Intel Corp (NASDAQ:INTC) Chief Executive Pat Gelsinger said without government funding “we’re still going to start the Ohio site. It’s just not going to happen as fast and it’s not going to grow as big as quickly.”
The company was also seeking to expand production at a plant in Chengdu, China, but the Biden administration spurned the plan, Bloomberg reported in November. Intel declined to comment.
The outbound investment measure was originally proposed as a standalone bill by Republican Senators John Cornyn and Senator Bob Casey, but was later added to the House version of a massive bill that includes the grants for chipmakers and is aimed at countering China’s rise. A third source noted it was important not to antagonize Cornyn, a strong supporter of the chip funding.
Reuters obtained an email from the Semiconductor Industry Association (SIA), which has been mum on the provision, to its members last week seeking comment on a statement of principles describing the measure as “too broad,” and urging a separate legislative process for it.
“SIA encourages the development of policies that do not unnecessarily hinder non-sensitive, legitimate investment and related commercial activity,” the group wrote in the third version of the draft statement of principles, dated April 22 and toned down from a prior version.
“Prior to advancing outbound investment review policies, SIA encourages Congress to initiate a review process consisting of formal hearings, stakeholder engagement, and committee consideration.”
SIA declined to comment.
The concept behind the measure has support within the Biden administration. U.S. President Joe Biden’s National Security Advisor Jake Sullivan said in July the government was working on new investment screening and considering outbound investment as it seeks to better position the United States for competition in technology.
However, Politico reported that the Treasury Department was working to weaken momentum in Congress for the measure, pushing lawmakers to approve a modest fact-finding pilot program instead of new regulatory powers.
Business groups including the Chamber of Commerce have already voiced strong opposition to the legislative proposal, which would require the U.S. Trade Representative to form a committee to evaluate the transactions and recommend to the president which ones pose a national security risk and should be blocked.
A study by Rhodium said 43% of U.S. foreign direct investment transactions in China over the past two decades could have been subject to screening under the broad categories set out by the proposal.
The National Foreign Trade Council, whose members include Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), Exxon (NYSE:XOM) and Chevron (NYSE:CVX), has also circulated a draft letter to other D.C. lobbying groups expressing “strong opposition” the measure, and describing the creation of a new regulator as “unwarranted.”
“Creating a new interagency process will compound regulatory inefficiency and invite protectionism under the flag of national security,” the letter, obtained by Reuters and directed to House and Senate leaders of both parties, states.
The group declined to comment.
