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U.S. Looks to Possible Trade Tariffs To Quell Imports Of Cheap Chinese Processors

US moves to stem the flow of the world’s most powerful computer chips to China has led to it manufacturing and flooding the West with older chip technology that represent an economic threat.

Cheaper chips with old architecture also have the effect of wiping out competition with cheaper products made with technology that may be a decade old.

This has been an issue since the Trump Administration took action against China’s telecommunications giant Huawei Technologies. It denied China access to the West’s advanced chip making.

Former US Deputy National Security Advisor during the Trump administration, Matt Polinger, said this would give Beijing coercive leverage over every country and industry – military or civilian – and that was a large chunk of the chip universe, he told Reuters.

Fast forward to 2023, and the U.S. is again nervous about the impact of cheaper older-generation semiconductors being used in everything from medical equipment and dishwashers to newly made electric vehicles.

Asia Nikkei reports that a US House Committee has sent a joint letter to US trade representatives calling for action to stem US reliance on China’s older chips, including trade tariffs which would apply to the chips themselves rather than completed products.

“We are concerned that [China] is on track to flood the United States and global markets with foundational semiconductors,” the lawmakers wrote, according to the Asia Nikkei report. Compared to high-performance chips, “far less attention” has been given to the risk that a surge of Chinese-made foundational chips poses to U.S. economic security, the lawmakers said in the Asia Nikkei story.

In a general sense, the smaller the computer chip, the faster and more energy efficient it is. Nowadays, the most advanced computer chips are 8 nanometres or smaller, with the mature or older chips 28 nm or larger.

Most of the advanced processes are manufactured across the South China Sea in Taiwan in foundries operated by TSMC, and high-etch destinations such as South Korea.

The US is expected to consult its allies on the issue, including Australia.

At the same time, cutting-edge US artificial intelligence chip maker Nvidia is gearing to mass produce AI processors for the China market.

Reuters reports that Nvidia proposes to mass produce these AI chips starting in the second quarter and would comply with U.S. export rules. However, Chinese companies might be reluctant to buy processors they regard as behind the cutting-edge and opt for local alternatives, the Reuters report says.

As a result of being at the cutting edge, Nvidia’s share price went from a low point of US$118 in October 2022 to almost US$500 in December 2023.

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