Chinese Industry Associations Advise Against U.S. Chips

By Eduardo Baptista and Brenda Goh

BEIJING (Reuters) – Chinese companies are advised to be cautious about purchasing U.S. chips, deemed "no longer safe," and to source locally instead, as stated by four top industry associations on Tuesday. This unusual collective response follows heightened tensions between the U.S. and China, particularly with the anticipated return of U.S. President-elect Donald Trump, who has vowed to impose heavy tariffs on Chinese imports, reigniting a trade war.

The warnings from industry associations emerged after the U.S. initiated a crackdown on China's semiconductor sector, targeting 140 companies including Naura Technology Group, a chip equipment maker. This could significantly impact major U.S. chipmakers like Nvidia, AMD, and Intel, who have continued to sell products in China despite export restrictions but did not comment on the new developments.

Tom Nunlist from Trivium China noted a decisive shift in China's approach to U.S. actions. The associations, representing significant sectors like telecommunications and semiconductors with 6,400 member companies, didn't specify why U.S. chips were considered unsafe.

Additionally, China banned the export of rare minerals essential for military use and production processes. The U.S. plans to counteract China's coercive measures while continuing to diversify supply chains.

The Internet Society of China recommended that domestic firms carefully consider sourcing U.S. chips and expand collaborations with non-U.S. chip manufacturers, emphasizing a proactive approach towards domestic and foreign-owned chips made in China. It acknowledged that U.S. export controls had severely harmed China's internet industry.

The China Association of Communication Enterprises expressed a lack of trust in U.S. chip products and called for an investigation into the security of the critical information infrastructure's supply chain. This response mirrors China's earlier actions against the U.S. memory chipmaker Micron, which faced cybersecurity scrutiny and a ban on selling to crucial domestic sectors, inflicting significant revenue losses.

Intel is also under fire, as the Cybersecurity Association of China recently called for a review of its products due to perceived threats to national security and interests.