In May, Micron Technologies, the Idaho chip maker, suffered a major blow as part of the US-China technology war. The Chinese government has banned companies that handle critical information from buying Micron’s chips, saying the company failed a cybersecurity audit.

Micron said the change could destroy about an eighth of its global revenue. However, in June, the chipmaker announced that it would increase its investments in China – adding $600 million to expand a chip packaging facility in the Chinese city of Xian.

“This investment project demonstrates Micron’s unwavering commitment to its Chinese business and team,” an announcement posted on the company’s Chinese social media account said.

Global semiconductor companies find themselves in an extremely difficult position as they try to straddle a growing rift between the US and China. The semiconductor industry has become ground zero for the technological rivalry between Washington and Beijing, with new restrictions and punitive measures imposed by both sides.

U.S. officials say U.S. products have fueled Chinese military and surveillance programs that run counter to U.S. national security interests. They have imposed ever-tighter restrictions on the type of chips and chip-making equipment that can be shipped to China and are offering new incentives, including subsidies and tax breaks, for chip makers who choose to build new operations in the United States.

But factories can take years to build, and corporate ties between the countries remain strong. China is an important market for chips because it is home to many factories that produce chipped products, including smartphones, dishwashers, cars and computers, which are both exported around the world and bought by consumers in China.

Overall, China accounts for about a third of global semiconductor sales. But for some chipmakers, the country accounts for 60 percent or 70 percent of their revenue. Even when chips are manufactured in the United States, they are often shipped to China for assembly and testing.

“We can’t just flip a switch and say all of a sudden you have to get everything out of China,” said Emily S. Weinstein, a research associate at Georgetown’s Center for Security and Emerging Technologies.

The industry’s dependence on China highlights how the close – but extremely contentious – economic relationship between Washington and Beijing presents challenges for both sides.

Those tensions were reflected during Treasury Secretary Janet L. Yellen’s visit to Beijing this week, where she tried to walk a fine line by blaming some of China’s practices while insisting that the United States is not seeking to sever ties with the country.

Ms. Yellen criticized punitive measures that China has recently taken against foreign firms, including limiting the export of some minerals used in chip-making, and suggested that such actions were why the Biden administration tried to undercut American manufacturers from China. But she also asserted that the relationship between the United States and China is strategic and important.

“I made it clear that the United States is not seeking a wholesale separation of our economies,” Ms. Yellen said during a roundtable discussion with American companies operating in China. “We seek to diversify, not decouple. A decoupling of the world’s two largest economies would be destabilizing for the global economy, and would be practically impossible to do.”

The Biden administration is poised to begin investing heavily in American semiconductor manufacturing to lure factories from China. Later this year, the Commerce Department is expected to begin handing out funds to help companies build U.S. chip facilities. That money will come with strings attached: Companies that take financing must refrain from expanding high-tech manufacturing facilities in China.

The administration is also weighing further restrictions on the chips that can be sent to China, as part of a push to expand and end sweeping restrictions it issued last October.

These measures could include potential limits on sales to China of advanced chips used for artificial intelligence, new restrictions on Chinese companies’ access to U.S. cloud computing services, and restrictions on U.S. venture capital investments in the Chinese chip sector, according to people familiar with the matter. . plans

The administration also considered ending the licenses it had extended to some US tweeters that allowed them to continue selling products to Huawei, the Chinese telecommunications company.

Japan and the Netherlands, which are home to companies that make advanced chip manufacturing equipment, have also placed new restrictions on their sales to China, partly at the urging of the United States.

China has issued restrictions of its own, including new export controls on minerals used in chip manufacturing.

Amid tighter regulations and new incentive programs from the US and Europe, global chip companies are increasingly looking outside of China as they choose the locations for their next major investments. But these facilities will likely take years to build, meaning any changes to the global semiconductor market will unfold gradually.

John Neuffer, the president of the Semiconductor Industry Association, which represents the chip industry, said in a statement that the continued increase in controls poses a significant risk to the global competitiveness of the US industry.

“China is the world’s largest semiconductor market, and our companies simply need to do business there to continue to grow, innovate and stay ahead of global competitors,” he said. “We encourage solutions that protect national security, avoid unintended and lasting harm to the chip industry, and avoid future escalations.”

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