US Chipmakers Need China Sales to Fund R&D, Think Tank Says
The Information Technology and Innovation Foundation (ITIF) asserted in a new report that controls on semiconductor sales to China should be kept to a minimum to ensure that U.S. chipmakers have enough revenue to develop new products, remain competitive internationally and sustain American jobs.
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The technology think tank said China is a key market for the U.S. semiconductor industry, last year providing $77 billion, nearly a quarter of its $318 billion in total revenue. ITIF warned that U.S. chipmakers would be forced to cut their annual spending on research and development if export controls shrink their China revenue.
The report, “Decoupling Risks: How Semiconductor Export Controls Could Harm US Chipmakers and Innovation,” released Nov. 10, looked at four hypothetical scenarios: a total ban on U.S. chip exports to China; a 50% “decoupling,” in which export restrictions cause U.S. chipmakers to lose 50% of their China revenue; and decouplings of 25% and 10%. A total China ban would be expected to cause U.S. chipmakers to cut their annual R&D spending by about $14 billion, while 50%, 25% and 10% decouplings would likely lead to R&D reductions of $7 billion, $3 billion and $1 billion, respectively.
A loss of China revenue also would have significant employment implications. A total China ban, for example, would cause the U.S. semiconductor industry to support more than 80,000 fewer industry jobs and almost 500,000 fewer indirect or “downstream” jobs, the report said.
A full or partial decoupling would be a boon to U.S. firms’ foreign competitors. Under a total China ban, South Korea would gain the most annual revenue, $21 billion, followed by the EU at $15 billion, Taiwan at $14 billion, Japan at $12 billion, China at $9 billion and other nations at $5 billion, ITIF reported.
“The U.S. semiconductor industry needs to continue to maintain its share of the Chinese semiconductor market in order to sustain ongoing R&D investment, which helps it maintain leadership in the industry and enables the United States to maintain its leadership in the digital economy,” wrote ITIF policy analyst Trelysa Long, the report's author. “As such, U.S. policymakers should keep semiconductor export controls to a minimum in order to enable U.S. semiconductor firms to obtain high levels of revenue to invest in R&D.”
The report acknowledged that the U.S. has so far implemented only a “limited set” of controls on chip exports to China but noted that the restrictions could change significantly if the White House or Congress adopts a different approach. The Biden administration’s AI diffusion export control rule, which the Trump administration plans to rescind (see 2505070039 and 2509040038), was intended to protect sensitive technology, but it drew strong opposition from industry groups and companies that said it would harm U.S. technological leadership (see 2501130026, 2504210021 and 2505020043).
U.S. chipmakers could also lose Chinese revenue if Beijing curbs market access, as it did by banning Micron products from critical infrastructure in 2023. As a result of the ban, Micron reportedly plans to exit the server chips business in China.
The ITIF report’s release came a week after Rep. Rich McCormick, R-Ga., a member of the House Foreign Affairs Committee, said at a Hudson Institute event that the U.S. should ensure that its export controls aren't so restrictive that they harm the ability of American chipmakers to compete internationally (see 2511030033). “We have to be very careful that we don’t market ourselves out of world competition,” he said.