U.S. Commerce chief warns
against China semiconductor investment binge
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[November 03, 2016]
By David Lawder
(Reuters) - Massive government investment in China's semiconductor
industry risks distorting the global market for integrated circuits,
leading to damaging overcapacity and stifling innovation, U.S. Commerce
Secretary Penny Pritzker has warned.
The comments come at a time of growing trade tension between the Asian
giant and the United States over accusations of dumping, industrial
overcapacity and a souring business climate for foreign firms doing
business in China.
Republican presidential candidate Donald Trump has threatened to levy
punitive tariffs of 45 percent on imports of Chinese goods if he is
In a speech on Wednesday, Pritzker sharply criticized a $150-billion
plan by the Chinese government to expand the share of Chinese-made
integrated circuits in the domestic market to 70 percent by 2025, from 9
"Let me state the obvious: this unprecedented state-driven interference
would distort the market and undermine the innovation ecosystem,"
Pritzker said at the Center for Strategic Studies think-tank in
That level of investment would be equivalent to half of worldwide
semiconductor sales last year and result in market distortions similar
to those plaguing the steel, aluminum and green technology industries,
"The world has seen the effects of this type of targeted, government-led
interference before," she said.
"The result has been overcapacity in the global marketplace that has
artificially reduced prices, cost jobs in both the United States and
around the world, and caused significant damage to those industries
globally," Pritzker said.
It was "imperative we take steps to prevent a similar situation from
developing in the semiconductor industry," she added.
Such steps include a Commerce Department study of the global
semiconductor supply chain now underway, besides engaging with China,
and other governments, to persuade them to avoid policies that distort
markets or spur technology transfers.
"The U.S. government will make clear to China's leaders at every
opportunity that we will not accept a $150-billion industrial policy
designed to appropriate this industry," Pritzker added.
Chinese Foreign Ministry spokeswoman Hua Chunying said that China
advocates for all countries to provide a fair and transparent investment
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U.S. Commerce Secretary Penny Pritzker speaks during an interview
with Reuters in Bogota, Colombia, October 20, 2016. REUTERS/Felipe
"We hope everyone can rationally view relevant trade and investment
cooperation and work together to create a positive atmosphere," she told
reporters at a regular briefing when asked about Pritzker's remarks.
China's Ministry of Commerce did respond immediately to a request for
Earlier on Thursday, 12 U.S. senators urged that Zhongweng
International's $2.3-billion purchase of Cleveland, Ohio-based Aleris
Corp. be rejected by a national security review panel.
"In addition, we are seeing new attempts by China to acquire companies
and technology based on their government’s interests – not commercial
objectives. And we have witnessed attempts to restrict access to China’s
domestic market," Pritzker said.
The technology industry depends on a global supply chain, open and fair
trade and innovation, she said, warning against government behavior that
disrupts the system and distorts markets.
"China's effort to move up the value chain should be the result of
healthy competition and free and fair trade, not state-directed
investments aimed at distorting global markets," Pritzker said.
"In addition, no government should require technology transfer,
joint-venture, or localization as a quid pro quo for market access."
(Reporting by David Lawder; Additional reporting by Michael Martina in
Beijing; Editing by Clarence Fernandez and Simon Cameron-Moore)
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