The Chips Are Down For US Companies In China

THE APOLOGY TO China by US semiconductor manufacturer Intel for asking its suppliers not to use products and labour from Xinjiang due to human rights abuses against Uighurs is the latest example of a multinational company finding how uncomfortable it is to balance its reliance on Chinese suppliers and markets with the need to comply with US laws and sanctions and maintain its reputation in the West.

Its apology, posted on its Chinese social media accounts, that its commitment to avoid supply chains from Xinjiang was an expression of compliance with US law, rather than a statement of its position on the issue, was criticised for being insincere at best and duplicitous at worst in both China and the United States. The days when what is said in Chinese on Weibo of WeChat stays in China are long gone.

The nature of Intel’s product makes it less likely that it will suffer a consumer boycott in the way that Beijing punished fashion and sporting apparel companies H&M, Burberry, Adidas and Nike for similar perceived transgressions. Furthermore, like other countries, China is short of chips right now. However, the incident will reconfirm for policymakers their wisdom in expanding indigenous production to reduce reliance on US technology.

The greater risk to Intel is of retaliation against its operations in China, where it employs 10,000 people and generates a quarter of its revenue. Arbitrary administrative actions are the perpetual concern of foreign companies operating in China.

Late last month, Vice-Foreign Minister Xie Feng, whose portfolio is North America, met with representatives of US businesses operating in China, urging them to lobby against the Biden administration’s hardline stance against Beijing. None too subtly, he said that US companies that stayed silent could not expect to prosper in China. 

Speaking out in the way Intel did was not what he had in mind.

There is an emerging divide between US businesses that trade with China or source from it and those operating within the Chinese market. 

The former group seek to maintain as light a footprint in China as possible to minimise the ever-present risks against their operations and staff. Where possible, they operate arm’s length business relationships with local firms or licence their brands, products and services within the country.

The latter set has scant interest in the United States taking a harder line with China over commercial and technology issues, intermingling trade policy with national security, and the nascent decoupling of the two economies, most visible in capital markets and technology. 

Those companies, it should be said, show no indications of withdrawing from China. Yet they will have to become increasingly embedded in the ‘domestic circulation’ side of China’s ‘dual circulation’ development model, with all that that entails, and adjust their risk tolerance for damaging their reputation in international markets accordingly.

Given the changing attitudes in the United States and Europe towards China among lawmakers and corporate stakeholders like employees and customers, striking that balance may prove not only uncomfortable but impossible. 



Filed under China-U.S., Economy, Industry, Technology

3 responses to “The Chips Are Down For US Companies In China

  1. Pingback: Walmart Gets Ensnared In US-China Dispute Over Xinjiang | China Bystander

  2. Pingback: Xinjiang Gets A New Party Boss, And Subtle Shift In Emphasis On Stability | China Bystander

  3. Pingback: Walmart Put On Notice In China | China Bystander

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