U.S. Commerce chief warns against China semiconductor investment binge

Thu Nov 3, 2016 4:34am EDT
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By David Lawder

WASHINGTON (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 elected.

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 percent now.

"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 Washington.

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, Pritzker added.

"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.   Continued...

U.S. Commerce Secretary Penny Pritzker speaks during an interview with Reuters in Bogota, Colombia, October 20, 2016.  REUTERS/Felipe Caicedo