The United States and the European Union agreed to continue their collaboration on identifying and addressing disruptions in the semiconductor sector for three years, with a focus on mainstream 'legacy' chips from China.

On April 4 and 5, 2024, the sixth ministerial meeting of the Trade and Technology Council (TTC) was held in Leuven, Belgium, with Commission Vice Presidents Margrethe Vestager and Valdis Dombrovskis for the EU and Secretary of State Antony Blinken and Secretary of Commerce Gina Raimondo for the US side. On Friday, the two sides issued a joint statement in which they agreed to share market intelligence about 'non-market' policies and practices, which they claim persist in China and to coordinate measures to tackle distortions in the global supply chain.

The US and EU are increasingly concerned about China's massive push into legacy chips, typically produced with 28-nm equipment or above, technology introduced more than a decade ago. Legacy chips are essential to the global economy as critical components for smartphones, electric vehicles, appliances, or military equipment.

Why does it matter?

The US and Europe are trying to strengthen their domestic chip production in order to decrease their reliance on Asian manufacturers, particularly from China. They are now investing tens of billions through government subsidies such as the US Chips and Science Act to increase their chip manufacturing output.

The US has implemented comprehensive export controls to limit China's ability to secure advanced chips, but Beijing has responded by setting aside billions to fund factories for legacy chips. The Biden administration has already taken action against SMIC to restrict the sale of chip manufacturing technology and parts to the Chinese company. Last year, the US Commerce Department even sent letters to US suppliers to Semiconductor Manufacturing International Corporation (SMIC), suspending export licenses to SMIC's most advanced factory. This resulted in blocking shipments of chipmaking materials worth millions of dollars from at least one US supplier.

The Biden administration is pushing Brussels to align its position and reconsider how to safeguard its trade interests. Under pressure, ASML, the Dutch giant chip tool maker, could expand its partial consent to US export restrictions to China for its equipment and services.