Amid China's semiconductor ascendance, Chinese consumer electronics corporation Gree Electric announced it has developed its own chip. Gree Electric is a leading company in the global air conditioning and heating, ventilation, and air conditioning (HVAC) market, recording approximately 204 billion yuan (about 40 trillion won) in revenue last year. While China has wielded power in the legacy semiconductor sector, which has avoided the sharp edge of U.S. semiconductor regulations, the U.S. government is expected to begin a trade investigation into Chinese legacy semiconductors.
On the 16th (local time), Gree Electric Chairman Dong Mingzhu noted in an interview with local Chinese media Sina.com that the company has secured semiconductor research, design, and manufacturing capabilities. This achievement comes six years after Gree Electric embarked on the development of its own chips. Chairman Dong emphasized, "This result was achieved without funding from the Chinese government." However, he did not specify the exact types of chips that Gree Electric is currently capable of producing.
In recent years, Chinese appliance and IT device manufacturers such as Xiaomi and Midea have been developing their own chips to increase semiconductor self-reliance and secure supply chain resilience. Gree Electric also established a subsidiary to prioritize the development of chips for its flagship product, air conditioners, with the goal of expanding smart home product production in 2018. Earlier in March, Chairman Dong announced that Gree Electric is building a silicon carbide (SiC) chip factory.
As China's self-reliance in the lower-performance legacy semiconductor market increases, the U.S. is moving to expand the scope of its regulations. On the same day, The New York Times (NYT) reported that the Biden administration is preparing a trade investigation into China's production of legacy semiconductors. Over two years ago, the U.S. government has strengthened regulations to prevent China from accessing cutting-edge semiconductors under the guise of national security threats, but has not targeted legacy semiconductors.
However, the U.S. government is moving to respond as the Chinese counterattack in the legacy semiconductor sector, which is used to power a wide range of products including smartphones, appliances, automobiles, weapons, and telecommunications networks, intensifies. According to U.S. government statistics, about half of the new legacy chip factories worldwide are expected to be built by Chinese corporations over the next three to five years. The reliance on China in the global semiconductor supply chain is increasing, and the U.S. is concerned that the integration of these semiconductors into weapons and other products amplifies cybersecurity threats.
The U.S. trade investigation may ultimately lead to tariffs, import bans, and other measures against Chinese legacy semiconductors and products that include them. Chinese chips are more likely to enter the U.S. embedded in appliances and other products rather than on their own, so the U.S. Department of Commerce noted that it may consider a "parts tariff," which would apply tariffs only to chips contained within products.
Previously, U.S. Secretary of Commerce Gina Raimondo said on the 7th, "China is producing semiconductors in new factories with subsidies and dumping them into the global market to lower prices," adding, "This is unfair and could justify imposing tariffs." However, even if the Biden administration initiates a trade investigation into Chinese legacy semiconductors, it will take more than six months to reach a conclusion, so the final decision is likely to be made by the Trump administration that will take office next year.