EU joins US in ‘depriving China of the most advanced chips

A senior European Union trade official said on Friday that the US had the bloc’s “full” commitment to the goal of choking China’s semiconductor industry.

“We fully agree with the objective of depriving China of the most advanced chips”, Thierry Breton, the EU’s internal-market commissioner, said at the Centre for Strategic and International Studies.

“We cannot allow China to access the most advanced technologies.”

Breton made his remarks just hours before reports emerged that US President Joe Biden had struck a deal with the Netherlands and Japan to restrict exports of some advanced chipmaking machinery to China.

In October, the US restricted exports of high-end semiconductors and chip-making technology to China. Since then, the Biden administration has pressed Europe to take similar measures. But the EU has been wary.

Last week, the Dutch trade minister Liesje Schreinemacher said that the Netherlands would not immediately comply with US restrictions on China, and that it was consulting allies in Asia and the EU.

Since 2019, the Dutch government has denied ASML Holding, the Netherlands’ largest company and the world’s leading manufacturer of hi-tech equipment used in producing most advanced chips, permission to ship its most advanced machines to China. However, ASML sold €2 billion (US$2.17 billion) worth of older machines to China in 2021.

“You will always find Europe by your side when it comes to ensuring our common security in technology,” Breton added, warning that any action should be “limited to what is necessary from a security point of view”.

Citing successful transatlantic cooperation on 5G telecoms technology and semiconductors, Breton urged a deeper alignment on rare earths to “reduce collective reliance on Asia” despite “differences”.

In August, Biden signed into law the Chips and Science Act to bolster American semiconductor research, development and production through federal subsidies, both to cut China out of chip supply chains and to prioritise domestic manufacturing.

The EU is expected to pass its own version, the EU Chips Act, later this year. The legislation hopes to double Europe’s share of global chip manufacturing capacity to roughly 20 per cent.

“I see a very strong alignment between EU and the US on this agenda,” Breton said of restricting China’s access to technologies like microchips, quantum computing and artificial intelligence.

“We worked together on 5G, cybersecurity to remove high-risk suppliers from our networks. And we are following closely the ongoing Chinese investment into European critical infrastructure on semiconductors”.

The 27-member EU has also expressed apprehension over Biden’s signature climate legislation, the Inflation Reduction Act. Since it was signed into law last year, the EU has condemned what it calls its protectionist “America First” approach, an apparent violation of international trade norms.

The legislation doles out over US$300 billion in subsidies to clean-energy transition programmes, including massive incentives for companies that manufacture their electric vehicles in the US.

Breton played down the disagreements over the subsidies, saying that “sometimes there are differences, but that’s normal”.

He did add that the EU was negotiating with the US concerning them: “I’m confident that we will have quick results.”

Last week at the World Economic Forum in Davos, Switzerland, European Commission President Ursula von der Leyen announced the Net-Zero Industry Act, Europe’s response to the Inflation Reduction Act. “We Europeans also need to get better at nurturing our own clean-tech industry,” she said.

Citing what he called “Chinese activism” in many mineral-rich African countries, Breton said that “we must develop another model, a new type of partnership to secure our supply chains”.

He accused China of operating on the continent “without any concerns for the economic development” of African states, and said that Beijing’s investment model relied on “extracting and sending the raw materials to be refined in China”.

Breton proposed that any new joint EU and US model should ramp up refining, processing and recycling capacities in the African countries where the resources were mined.

Breton, who said he would be meeting with US Commerce Secretary Gina Raimondo, predicted that the post-war transatlantic alliance would “probably” continue for centuries as the world and the geopolitical order are “reshaped”.

“This alliance must continue to evolve and adapt,” he said. South China Morning Post