China's Semiconductor Growth Plans Threaten U.S. Chip Makers

U.S.-based chip makers, most of which are based in Silicon Valley, Calif., are being threatened by China’s semiconductor industry growth plans, San Jose Mercury News reported.

Last year, China announced its five-year plan to expand its semiconductor industry by over 20 percent annually by investing up to $100 billion in both domestic markets and acquisitions in foreign countries.

In Sept. 2014, China appeared to have made its first move when a group of Chinese investors offered to acquire California-based camera sensor manufacturer OmniVision Technologies for $1.7 billion, Bloomberg reported. OmniVision holds about 30 percent of the digital sensors market.

Not much was heard about the offer since then, triggering rumors that the U.S. Committee on Foreign Investment could have interfered with the deal. The U.S. agency, which looks at acquisitions of U.S. firms by foreign buyers both for national security and competition concerns, did not comment on the issue.

Then last month, a Chinese consortium made a $639-million offer to purchase another California-based company, Integrated Silicon Solution, Inc., a global seller of specialty memory chips whose customers include U.S. firms that supply military and aerospace companies.

China expert Derek Sissors believes that the ISSI deal will less likely attract opposition because it is much smaller than the OmniVision deal.

These moves by the Chinese government with help from Chinese investors have left U.S. semiconductor manufacturers wondering how they will fit in.

"I think the American semiconductor industry is torn between resisting Chinese intrusion into this field and buying into it," according to Orville Schell, director of U.S.-China relations for the Asia Society.

The Semiconductor Industry Association hopes that China's moves won't lead to unfair competition between U.S. and Chinese semiconductor makers, said John Neuffer, president of the U.S.-based association.