China's major trade association for the chip industry announced Thursday it will establish a work group with its U.S.-based counterpart. Experts say this will improve communication in the semiconductor industry in both nations, but may not change the situation facing China's domestic sector.
Made of semiconductor materials, chips are an essential component at the heart of economic growth and tech innovation. They're also one of the sources of tension in China-U.S. relations.
As Beijing and Washington fight over technology, the Chinese Semiconductor Industry Association (CSIA) and the U.S. Semiconductor Industry Association are setting up a work group to discuss issues such as intellectual property and trade policy.
"The work group will help both parties strengthen dialogue, express their wishes and reduce friction," said Wang Xiaolong, director of the research department at ICWise, a research provider focusing on China's semiconductor industry.
But while it's the first step, Wang said the work group, and even the Biden administration, will not fundamentally change the situation facing China's semiconductor industry.
"This is because China's national strength is gradually approaching the U.S. and the U.S. will not allow China to surpass it, so it will restrict China's high-tech industries. But the U.S. still needs to cooperate with China," Wang said.
The chip industry is one of the largest export industries for the U.S. and one of the few that still maintains a trade surplus with China. According to official data, global sales for U.S. semiconductor companies were nearly $200 billion in 2019, with China accounting for 36 percent of those sales.
Yet China, the world's largest semiconductor purchaser, is lagging behind in domestic production. Data shows that of the $143 billion worth of chips sold in China in 2020, only about $23 billion were produced in China, around just 16 percent.
The semiconductor industry has been a bottleneck problem for China. But Wang said if it's politicized, Beijing will find itself in an even tougher situation.
In 2020, the U.S. sanctioned Chinese tech giant Huawei, preventing it from sourcing components and accessing chips from manufacturers that use U.S. technology in the production process. This has put pressure on Huawei but also led the company to turn to domestic chip development and manufacturing.
Wang said in the future, Washington's control of Huawei and other enterprises may be lessened in terms of absolute strength, but it will be more refined and precise.
This all comes as the world faces a global chip shortage due to the pandemic. And as senior officials from China and the U.S. are set to meet next week, hopes and questions remain about future cooperation.