China Chip Industry Group Says Working With U.S. Counterpart

A Chinese semiconductor industry group said it has agreed to work with its U.S. counterpart on chip-related issues, a rare example of bilateral cooperation in an area that has become a focal point of tensions between Washington and Beijing.

The China Semiconductor Industry Association said Thursday in a statement on its website that it will form a working group with the Washington, D.C.-based Semiconductor Industry Association. Ten chip companies from each nation will meet twice a year to discuss policies ranging from export curbs to supply-chain safety and encryption technology, the statement said.

Shares of Chinese firms involved in the chip industry advanced after the statement appeared on the CSIA’s website. Semiconductor Manufacturing International Corp. rose as much as 12% in Hong Kong trading. Hua Hong Semiconductor Ltd. and Shanghai Fudan Microelectronics Group Co. surged at least 13% and 14% respectively.

The U.S. association, which represents companies like Intel Corp. and Qualcomm Inc., said the working group was created for sharing public information regarding general trade matters. The SIA maintains “regular dialog with our industry counterparts around the world, including China, and this is part of that ongoing effort. SIA is committed to working with the U.S. government on the shared goal of enhancing American semiconductor competitiveness while protecting national security,” the organization said in a statement.

People familiar with the matter said there’s no U.S. government involvement in the working group and one said the meeting would not include business executives but rather be led by technical experts. Both Semiconductor Industry Associations are members of the World Semiconductor Council and have maintained regular discussions.

The future of the semiconductor industry is becoming a major issue in the tense U.S.-China relationship. Premier Li Keqiang vowed in a speech last week that his country would boost spending and drive research into cutting-edge chips and artificial intelligence as China seeks to reduce reliance on U.S. technologies. The Asian nation imports $300 billion of semiconductors annually.

In the U.S., the administration under former President Donald Trump took steps to limit the growth of Chinese national champions such as Huawei Technologies Co. and SMIC, China’s largest chip producer. Since entering office in January, President Joe Biden’s administration has signaled that it plans to keep a tough stance toward Beijing. Biden has said that technology is a key area of strategic competition between the two countries.

The U.S. believes China aims to undercut America’s longstanding technological advantage and to take over as the global leader in the technologies and industries of the future, according to a White House official. To help buoy the U.S.’s leadership, the administration is committed to making major investments in science and technology research and development, advanced manufacturing, and supply chain security.

U.S. Senator Todd Young, a Republican from Indiana, said the idea that the two industry groups would work together is recognition of the importance of semiconductors in daily life. “However, one thing that has become abundantly clear over the past year is that China is not a country that shares our values, so I am deeply skeptical about any partnerships with them on encryption matters,” Young said in a statement, responding to news of the groups’ cooperation. Young also highlighted the importance of resilient supply chains, noting that those that include critical items like semiconductors, must not be overly dependent on lowest-cost manufacturers overseas.

News of the ties between the industry associations comes as U.S. and Chinese officials are set to hold talks next week in Alaska, in the first high-level in-person meeting between the two countries since President Biden took office. Relations between the two world powers sank to their lowest level in decades under Trump, with both nations ramping up sanctions and tariffs, expelling journalists and closing consulates.

Cooperation between the industry groups is badly needed, said Stewart Randall, head of electronics at consultancy Intralink in Shanghai. “It would be a disaster if two semiconductor worlds were created where nothing was inter-operable or there were no standards,” he said.

CSIA was formed by China’s top chip suppliers, labs and investors, including some that are on Washington’s blacklist, according to its website. Its management team is a who’s-who of some of the most prominent figures in the country’s semiconductor industry. The association’s head is Zhou Zixue, chairman of Hong Kong-listed SMIC. Xu Zhijun, deputy chairman on Huawei’s board, and Zhao Weiguo, chairman of Tsinghua Unigroup, are board members.

©2021 Bloomberg L.P.

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