Behind the expansion of US chip giants in China
The news that the U.S. chip giant has expanded its investment in China has aroused widespread concern in the industry. Previously, the U.S. government had banned chip giants such as Micron Technology from selling products in China due to cybersecurity issues, and the two sides were at a stalemate. Realistic interests forced Micron to make a 180-degree turn.
Forced to bow his head
Micron Technology has made huge profits in the Chinese market, accounting for 58% of its total revenue in 2018. After the embargo, Micron expects its revenue in China to halve, with its fiscal 2023 performance plummeting 49%. Faced with huge losses, Micron had to bow its head and relent.
At the beginning of this year, Micron announced that it would invest 4.3 billion yuan to build a factory in Xi'an, and later its CEO said that it would continue to expand its investment in China. This is seen as Micron's "payment of nomination" to the Chinese market, with the aim of continuing to profit in this huge market.
We have to pay attention to the Chinese market
Micron's approach is not unique. In recent years, the game between China and the United States in the field of chips has intensified, and the United States has continued to increase sanctions on Chinese technology companies, but at the same time, it is also aware of the importance of China's chip market.
According to the Semiconductor Industry Association, China's chip market will reach $192 billion in 2021, accounting for 34% of the global chip market, making it the world's largest chip consumer. No chip giant can succeed on a global scale and ignore the huge market of China.
Despite the severe sanctions imposed by the U.S. government on Chinese technology companies such as Huawei, chip giants have had to pay attention to the Chinese market and expand investment in China to get a piece of the pie. Companies such as Intel, AMD, and others have similar plans and actions.
The reason why the U.S. chip giant is expanding its investment in China
China's chip market has huge potential
China is not only the world's largest consumer of chips, but the demand for chips is still growing rapidly. According to industry forecasts, by 2030, the size of China's chip market will exceed 1.4 trillion yuan. This presents a huge market opportunity for chipmakers.
Micron and other U.S. chip giants have expanded their investment in China, mainly because of China's huge and fast-growing chip market. China is vigorously developing emerging industries, and the demand for chips will increase day by day, and no company wants to miss this important strategic opportunity.
Avoid the risk of U.S. government sanctions
On the other hand, the U.S. government's sanctions on Chinese technology companies have also prompted U.S. chip giants to increase the pace of investment in China. Once included in the sanctions list, the company will not be able to continue to export chip products to China, and the loss will be huge.
By setting up factories in China, U.S. chip giants can circumvent U.S. government sanctions and ensure that their products can be supplied to the Chinese market. This is not only conducive to the company's own interests, but also conducive to maintaining the stability of the global chip supply chain.
Access to Chinese government support and preferential policies
The Chinese government has been vigorously supporting the development of the chip industry and has provided many preferential policies to attract foreign investment. The expansion of US chip giants in China is also to obtain support and preferential treatment from the Chinese government.
For example, Micron's construction of a factory in Xi'an has received land and tax exemptions from the Chinese government. These preferential policies have undoubtedly improved the attractiveness of investment and reduced investment risks and costs.
The impact and prospects of U.S. chip giants' investment in China
Affect the pattern of the chip industry in China and the United States
The expansion of investment by U.S. chip giants in China will profoundly affect the chip industry pattern in China, the United States and even the world.
On the one hand, this will intensify the internationalization process of China's chip industry. As more foreign-funded companies build factories in China, China's local chip companies will face greater competitive pressure and will be forced to accelerate the pace of technological innovation. On the other hand, the investment of foreign-funded enterprises will also bring advanced technology and management experience to China, and promote the overall level of the industry.
For the United States, although the investment of chip giants in China may divert employment in a country, it is also conducive to enterprises to avoid the risk of government sanctions and maintain global competitiveness.
It is conducive to alleviating the scientific and technological confrontation between China and the United States
The confrontation between China and the United States in the field of science and technology has reached many fields such as chips, which has seriously affected global scientific and technological innovation and industrial development. The expansion of US chip giants in China is conducive to easing tensions between the two sides to a certain extent.
Companies' interests have forced them to abandon ideological considerations and embrace each other's markets. This will create favorable conditions for the Chinese and US governments to resume dialogue and ease contradictions. Neither party can get the most out of the decoupling.
It calls for strengthening cooperation between China and the United States in the chip industry
Cooperation between China and the United States in the field of chips will continue to be the general trend. Whether it's to acquire technology or open up markets, both sides need to be open to each other and strengthen cooperation.
China should further relax restrictions on foreign investment to create a level playing field for foreign companies, and the United States should ease excessive restrictions on Chinese companies such as Huawei to maintain the stability of the global chip supply chain. Only on the basis of mutual respect, mutual benefit and win-win results can the chip industry in China and the United States achieve long-term and healthy development.