US Government Discourages Intel’s Plans to Ease Chip Shortage By Expanding in China

"Intel's plan to ease the ongoing chip shortage by increasing production in China has reportedly been opposed by the Biden administration," writes PC Magazine, "over concerns about the potential security impact." Bloomberg reports that Intel wanted to manufacture silicon wafers in a factory located in Chengdu, China by the end of 2022. When the company recently shared details of this plan with the U.S. government, however, "Biden administration officials strongly discouraged the move." The report doesn't specify the exact nature of the White House's security concerns. Relations between the U.S. and China have reached the point where it could be anything from a fear of Intel's designs being stolen to the possibility of the processors being compromised in some way. Bloomberg reports that Intel has also been seeking federal assistance "to ramp up research and production in the U.S.," with Intel adding in a statement that "Intel and the Biden administration share a goal to address the ongoing industrywide shortage of microchips, and we have explored a number of approaches with the U.S. government. Our focus is on the significant ongoing expansion of our existing semiconductor manufacturing operations and our plans to invest tens of billions of dollars in new wafer fabrication plants in the U.S. and Europe." But PC Magazine points out that "Much of that money is coming from government sources, however, which is part of the reason why the White House was briefed on Intel's plan to increase production in China to begin with." Bloomberg reports that the Biden administration "is scrambling to address constraints, but it's also trying to bring production of vital components back to the U.S. — a goal Intel's China plan didn't serve..." The episode comes as the White House is debating whether to restrict certain strategic investments into China. National Security Adviser Jake Sullivan has said the administration is considering an outbound investment screening mechanism and is working with allies on what it could look like... A representative for the White House declined to comment on specific transactions or investments, but said the administration is "very focused on preventing China from using U.S. technologies, know-how and investment to develop state-of-the-art capabilities," which could contribute to human rights abuses or activities that threaten U.S. national security... Following deliberations with the Biden team, Intel has no plans to add the production in China at the moment, a person familiar with the decision said... The chip industry has a complicated relationship with China, one that became much more difficult during the Trump administration's trade war. China is the biggest consumer of semiconductors for local use, and it serves as the assembly center for much of the world's electronics. To help with logistics and to keep Beijing happy, chipmakers — including Intel — have located plants there. But they face longstanding U.S. government restrictions that prevent them from exporting cutting-edge semiconductors to the country. At the same time, the article points out, automakers "are losing more than $200 billion in revenue because of the lack of chips," while Apple "expects to miss out on more than $6 billion of sales this quarter because it can't get enough components."

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