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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The US is pushing allies in Europe and Asia to tighten restrictions on exports of chip-related technology and tools to China amid rising concerns about Huawei’s development of advanced semiconductors.Washington wants Japan, South Korea and the Netherlands to use existing export controls more aggressively, including stopping engineers from their countries servicing chipmaking tools at advanced semiconductor fabs in China, according to five people familiar with the conversations.The Biden administration introduced sweeping export controls in 2022 that included a ban on “US persons” — American nationals and companies — from providing direct or indirect support to certain advanced chip factories in China. But there are far fewer restrictions preventing Chinese groups from hiring engineers from the allies.“To make the controls more effective against China and to level the playing field for US industry, the allies need to prohibit their companies from providing services that support the production of advanced node integrated circuits in China,” said Kevin Wolf, an export control expert at the law firm Akin Gump.  The US has become increasingly concerned about the speed with which Chinese groups are developing advanced chips despite the tougher American controls. When commerce secretary Gina Raimondo visited China last year, Huawei released the Mate 60 Pro, a phone that included an advanced chip that surprised export control experts in the US government.Washington also wants the allies to make it harder for China to circumvent US restrictions. In particular, they want them to make it more difficult for companies from third countries to supply China with items that include technology produced in Japan, South Korea or the Netherlands.The US uses an expansive tool called the “Foreign Direct Product Rule” to target Huawei. It enables the commerce department to block non-US companies from supplying the company with items containing American technology even if it is made outside the US. But the allies have not implemented measures that would have similar impact. One person familiar with the situation said the US was not asking the allies to create new mechanisms along the lines of the FDPR but just wanted them to use existing export control regimes to tackle the issue.The White House and commerce department declined to comment. Japan’s ministry for economy, trade and industry and the Dutch government also declined to comment. South Korea’s ministry of industry, trade and energy said it was “not aware” of any US request to toughen its export controls.It remains unclear how the allies will respond. They tightened controls on exports of chip-related technology after the 2022 American controls. Some Asian companies are frustrated that the US continues to let some of its companies, such as Qualcomm, to supply Huawei with chips at the same time that Washington is putting pressure on allies.Some officials in allied countries have also argued that having engineers at Chinese groups is necessary to help them monitor local activity, according to one of the people involved in the discussions.Japan last year imposed restrictions on 23 types of chipmaking tools. At the time, Japanese officials said the restrictions went further than those imposed by the US since exporters would need licences for all regions, giving the trade ministry far-reaching oversight. But some officials said there was a lack of transparency into how tough Japan is actually being when it came to implementing the export controls.Many Japanese companies have significantly cut ties with Huawei, but the Chinese group remains a member of Keidanren, the country’s most influential business lobby group. EU trade commissioner Valdis Dombrovskis told the Financial Times that the bloc would be reluctant to restrict European nationals from working in China. “This topic on talent is a rather more fundamental question of personal freedom. That is an area where we need to tread very carefully,” Dombrovskis said.Separately on Thursday, Marco Rubio, the Republican vice-chair of the Senate intelligence committee, and Elise Stefanik, the fourth-ranking House Republican, urged Raimondo to revoke Huawei-related export licences after reports that it had developed a laptop with an Intel chip.“It is clear from these trends that Huawei, a blacklisted company that was on the ropes just a few years ago, is making a comeback,” they wrote in a letter. “It is doing so because the Biden administration, led by your department, is failing to protect American ingenuity.”  Intel said it “strictly complies with all the laws and regulations in the countries where we do business”.Additional reporting by Song Jung-a in Seoul and Ryan McMorrow in BeijingVideo: The race for semiconductor supremacy | FT Film   More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is the author of ‘Chip War’With recent multi-billion-dollar grants to Intel, TSMC, Samsung, and Micron, the US government has now spent over half its $39bn in Chips Act incentives. In so doing it has driven an unexpected investment boom. Chip companies and supply chain partners have announced investments totalling $327bn over the next 10 years, according to Semiconductor Industry Association calculations. US statistics show a stunning 15-fold increase in construction of manufacturing facilities for computing and electronics devices. Debate about the Chips Act has focused on delays and manufacturing difficulties, but the vast volume of investment tells a different story.Pandemic-era shortages showed how small deficits of even lower-tech foundational chips could cause hundreds of billions of dollars of economic damage. The ensuing Chips Act aims to encourage construction of new chip fabrication facilities (fabs) in the US. This will reduce reliance on a small number of East Asian suppliers — today nearly all cutting-edge processors are made in Taiwan. The investment surge this has driven is reducing these vulnerabilities. Samsung, TSMC, and Intel — the world’s leading chipmakers — are now building major new plants in the US. Intel will manufacture its most advanced chips there, while TSMC will introduce its cutting-edge 2-nanometre process in Arizona around two years after bringing it online in Taiwan. Commerce Secretary Gina Raimondo notes that by 2030, the US will probably produce around 20 per cent of the world’s most advanced chips, up from zero today. This still won’t mean complete self-sufficiency, given that the US consumes over a quarter of the world’s chips. Production of smartphones and consumer electronics would be disrupted in the event of a crisis in east Asia, an ever looming fear. But this production would be roughly enough for the needs of critical infrastructure like datacentres and telecoms. Chips aren’t perfectly fungible, of course, and not every plant can easily produce every type, but the US will have much more scope to manage shocks. As the pandemic-era shortages showed, it isn’t only advanced chips that are economically critical. Manufacturers of autos, missiles or medical devices require large volumes of foundational chips as well. Here, too, the Chips Act is providing significant new supply. Ford and GM have announced major long-term supply deals with US chipmaker GlobalFoundries, which is expanding production with $1.5bn in Chips Act funds. Microchip, a widely used Arizona manufacturer of microcontroller chips, also received a grant to expand. Texas Instruments is building a string of new foundational chip fabs across Texas and Utah, catalysed by generous investment tax credits. Few if any of these investments would have happened without the Chips Act. Production in allied countries is helping, too. Japan and Europe are investing in foundational chip capacity. Microchip and Analog Devices, another US chipmaker, have both announced plans to shift some production from TSMC in Taiwan to the company’s new plant in Japan, providing increased resilience against China risks. Critics worry all these incentives create a subsidy race — but this began well before the Chips Act. A 2019 OECD study found that between 2014 and 2018 at least two US companies received more money from a foreign government than from the US. That’s partly why chipmaking migrated to high-subsidy locations. Now the Chips Act and similar incentives in Japan and Europe are attracting investment back. Will all these promised plants get built? Many of them already are. The scale of fab construction in the US is now stretching contractors’ ability to find workers with speciality skills. TSMC plans high-volume chip production in its first Arizona plant early next year. If the chip market softens, some plants could get postponed, but the disbursement of grants is tied to progress in bringing fabs online. There’s still a risk that taxpayers are buying excess capacity if these new facilities can’t find customers. However, many tech executives like OpenAI’s Sam Altman are more worried about AI chip shortages than a glut. TSMC notes that its Arizona plant will work with Apple, Nvidia, Qualcomm, and AMD — four of its largest customers. Intel recently announced a deal to manufacture AI processors for Microsoft. Equity investors will debate whether these new investments can deliver an adequate financial return. Policymakers who see the Chips Act as an insurance policy against geopolitical shocks believe it is already paying dividends. Video: The race for semiconductor supremacy | FT Film    More