The European Commission is said to be sounding out chipmakers in the region about China's expanding production of commodity silicon, which has sparked concerns that it could flood the global market.

According to reports, the Commission, the executive arm of the European Union, is putting feelers out to the local semiconductor industry for its views on what their Chinese counterparts are doing.

Feedback is being sought ahead of two voluntary surveys for the semiconductor industry and major silicon-using industrial sectors that will be due in September, Reuters reports.

The concerns relate to China's own semiconductor industry, which is investing heavily to ramp up production of legacy chips, partly to reduce its reliance on foreign-made silicon in response to US policies designed to restrict Beijing's access to advanced technology.

As reported by The Register earlier this year, China's silicon manufacturing capacity is expected to more than double within the next five to seven years, and this could be a recipe for trouble if those chipmakers decide to use their increased production capacity to sell into the wider global market as well as serving the considerable domestic demand.

Market watcher TrendForce said that at least 32 large-scale wafer fabrication plants are planned or under construction in China. These are set to focus on making chips with mature production node processes, typically meaning 28nm or above, widely used for commodity chips in sectors such as household appliances and the automotive industry.

The potential is for a global oversupply situation, which would see chip prices plummet. In response, Western companies would likely exit the commodity sector of the market to focus on more profitable areas, leaving Chinese chipmakers in control.

We asked the European Commission about this matter, and it told us that both the European Union and the United States are investigating potential excessive dependencies for mature node ("legacy") semiconductors.

The European Union is also gathering information from the industry via a targeted consultation to assess further the use of legacy chips in supply chains, a spokesperson said in a statement, and both partners (EU and US) may develop joint or cooperative measures to address dependencies or distortionary effects.

In its statement, the European Commission also mentioned the EU-US Trade and Technology Council (TTC), a transatlantic talking shop for the two powers to discuss common approaches to trade and technology challenges.

"On the side of the fifth TTC ministerial meeting, which took place on 30 January 2024 in Washington DC, the EU and the US held a joint roundtable with high-level industry representatives dedicated to legacy semiconductor supply chains. Both the European Union and the United States are committed to continuing to engage closely with industry on the issue," the Commission said.

However, the Commission did not answer our question as to what sort of measures it could take to counter any distortionary effects it might uncover in the market.

According to Reuters, the Commission's antitrust chief, Margrethe Vestager, previously indicated that it might investigate legacy chips after a meeting in Belgium with US officials (likely the sixth ministerial meeting of the TTC).

It says the surveys are a fact-finding mission, with the Commission seeking to understand where industrial outfits source their chips. It is aiming for information on products and pricing, as well as estimates of the same from their Chinese rivals.

US Secretary of Commerce Gina Raimondo is quoted as saying at the time that there is "massive subsidization of that industry on behalf of the Chinese government, which could lead to huge market distortion," adding that it was estimated that China would produce around 60 percent of the legacy chips coming to the market in the "next handful of years."

Any potential action over China-made chips could further strain relations already soured by the EU's decision to raise tariffs on heavily subsidized electric vehicles imported from country. ®

https://www.theregister.com//2024/07/08/eu_china_commodity_chips/