China Slams US Chips as ‘No Longer Safe’ Amid Rising Trade Tensions and Retaliatory Export Bans

Chinese industry groups have labeled US chips as unreliable and unsafe, urging businesses to turn to domestic alternatives. The warning follows heightened trade tensions, including Beijing’s retaliatory export ban on critical minerals vital to semiconductor production.

US Chip Safety Questioned Amid Rising Tensions

According to Reuters, in an unusually coordinated reaction to Washington's restrictions on Chinese chipmakers, four of China's leading business groups warned Chinese companies on Tuesday that U.S. chips are "no longer safe" and urged them to purchase locally instead.

Even before the inauguration of Donald Trump as president-elect of the United States in January, tensions between the two countries have escalated as they have recently attacked each other's economies. Trump has pledged to reignite a trade war that he began during his first four years in office by imposing steep tariffs on Chinese imports.

The United States began its third crackdown on China's semiconductor industry in three years on Monday, cutting shipments to 140 businesses, including chip equipment producer Naura Technology Group. The industry associations issued warnings in response.

Impact on US Semiconductor Giants

Their recommendations may have an impact on American semiconductor behemoths like Intel, Nvidia, and AMD, who have circumvented China's export restrictions and continue to sell their wares there. Reuters attempted to get comment from the three corporations, but they did not react right away.

"Coordinated calls in China to limit procurement of U.S. chips are unhelpful, and any claims that American chips are ‘no longer safe or reliable’ are simply inaccurate," stated the Semiconductor Industry Association, a U.S. trade group that represents major chipmakers.

The group reiterated its conviction that "export controls should be narrow and targeted to meet specific national security objectives. ... We encourage both governments to avoid further escalation."

Beijing Responds with Rare Mineral Export Bans

According to Tom Nunlist, assistant director at research firm Trivium China, "China had been moving quite slowly or carefully in terms of retaliating against moves by the United States, but it seems pretty clear that now the gloves are off."

With a total of 6,400 members, the associations represent some of China's most important industries, such as electronics, information technology, transportation, and semiconductors.

Rare minerals utilized in solar cells, fiber optic cables, and other industrial processes were also barred from export by Beijing on Tuesday. The United States will continue its attempts to diversify supply chains away from China and take the appropriate steps to try to discourage any "coercive actions" from that country, according to a representative for the White House National Security Council.

Chinese Industry Encourages Local Semiconductor Adoption

In an official WeChat post, the Internet Society of China warned Chinese businesses against relying too much on American chip manufacturers and encouraged them to seek out partnerships with chip producers in other countries and regions, Investing.com reports.

More than that, it pushed for local companies to "proactively" adopt chips made by Chinese and foreign-owned companies alike.

Further, it went on to say that the "substantial harm" done to China's internet industry's health and development was due to U.S. chip export limitations. As a result of their attempts to localize production, the companies that the US government targeted claimed they could keep making products.

Security Concerns and Micron Precedent

According to the China Association of Communication Enterprises, the Chinese government ought to look into the security of the supply chain of the nation's vital information infrastructure as the Chinese no longer trust American chip manufacturers.

These warnings are similar to how China dealt with Micron, a U.S. memory chipmaker that was the focus of a cybersecurity investigation last year, just after the United States placed export restrictions on chipmaking technology to China.

Later on, China banned Micron from selling chips to important local industries, cutting into the company's revenue by low double digits.

Chipmaker Intel has also been under fire. The Cybersecurity Association of China, another powerful business body, demanded a security audit of Intel equipment in October, claiming that the American semiconductor manufacturer had "constantly harmed" China's interests and national security.