US Should Be Careful Not to Harm Semiconductor Industry With Upcoming Export Restrictions, Former Commerce Official Says

The U.S. should be mindful of not harming the U.S. technology industry as it seeks to impose export restrictions on semiconductor shipments to China, said James Andrew Lewis, director of the technology policy program at the Center for Strategic and International Studies. Those restrictions could cut the U.S. off from consumers, leading foreign companies to design U.S. components out of their products and build alternate supply sources, Lewis said in a May 5 CSIS post.

The Trump administration is considering increased export restrictions on Huawei and other Chinese companies that would further restrict sales of U.S. semiconductors (see 2004070024). In a related move, the Commerce Department announced new export restrictions last month that placed restrictions on exports to military end-uses and end-users (see 2005050035). When considering similar actions, the administration should ensure its measures do not hurt U.S. industries more than they hurt China, said Lewis, who was an official in both the Commerce and State departments and led the U.S. delegation at the Wassenaar Arrangement’s Experts Group.

“The desire to restrict exports is understandable,” Lewis said. “But overly broad restrictions will harm the United States more than China.”

An ideal export control approach would be one that slows China’s semiconductor growth while still allowing sales to U.S and Japanese companies “even if they are located in China,” Lewis said. The administration should not impose new restrictions on sales of “commodity chips,” he said, but should allow U.S. companies to continue to sell to China to preserve market share “in ways that do not give China strategic advantage.” Lewis suggested “this can be done by permitting exports of commodity chips even to companies such as Huawei.”

To bolster its competitive advantage, the U.S. should strengthen its semiconductor industry through research support and incentivize foreign semiconductor production to move to the U.S., Lewis said. “In both cases, this will entail billion-dollar or larger investment programs,” he said. “This sounds expensive but is appropriate and necessary for a strategic industry.”

Lewis also said the U.S. needs to work more closely with allies -- including Japan, South Korea and the European Union -- to counter China’s efforts. He said all are “prepared to cooperate” to restrict China’s access to semiconductor manufacturing equipment. “U.S. policy is more likely to succeed if done cooperatively as part of a larger strategy to reinforce the U.S. semiconductor industry,” he said.