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Chinese industry groups issue coordinated statement on US

chips

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Chipmakers affected could include Intel ( INTC ), Nvidia ( NVDA ), AMD

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China also bans exports of rare minerals to the US

(Updating Dec. 3 story with Dec. 4 comment from analyst in

paragraphs 10-12)

By Eduardo Baptista and Brenda Goh

BEIJING, Dec 3 (Reuters) - Chinese companies should be

wary of buying U.S. chips as they are "no longer safe" and buy

locally instead, four of the country's top industry associations

said on Tuesday in a rare coordinated response to Washington's

curbs on Chinese chipmakers.

The two nations have targeted each other's economies in the

last few days, escalating tensions even before U.S.

President-elect Donald Trump returns to the White House in

January. Trump has promised to impose heavy tariffs on imported

Chinese goods, reviving a trade war from his first four-year

term as president.

The industry association warnings came after the United

States on Monday launched its third crackdown in three years on

China's semiconductor industry, curbing exports to 140

companies, including chip equipment maker Naura Technology Group

.

Their advice could affect U.S. chipmaking giants such as

Nvidia ( NVDA ), AMD, and Intel ( INTC ) which, despite

export controls, have managed to keep selling products in the

Chinese market. The three companies did not immediately respond

to a Reuters request for comment.

The Semiconductor Industry Association, a U.S. trade

association representing major chipmakers, said, "Coordinated

calls in China to limit procurement of U.S. chips are unhelpful,

and any claims that American chips are 'no longer safe or

reliable' are simply inaccurate."

The group reiterated its belief that "export controls should

be narrow and targeted to meet specific national security

objectives ... We encourage both governments to avoid further

escalation."

The associations cover some of China's largest industries,

including telecommunications, the digital economy, autos, and

semiconductors and combined count 6,400 companies as members.

The statements, released shortly after each other, did not

detail why U.S. chips were unsafe or unreliable.

Beijing on Tuesday also banned exports of rare minerals used

in military applications, solar cells, fibre optic cables and

other manufacturing processes. A White House National Security

Council spokesperson said the U.S. would take necessary steps to

try to deter other "coercive actions" from China and continue

efforts to diversify supply chains away from that nation.

Tom Nunlist, associate director at policy research

consultancy Trivium China, said the warnings from the

associations could be perceived as soft advice. Companies may

listen to it, but whether they take action would be dictated by

the market.

The export ban on critical minerals was much more crucial,

he added.

"China had been moving quite slowly or carefully in terms of

retaliating against moves by the United States, but it seems

pretty clear that now the gloves are off."

The Internet Society of China urged domestic companies to

think carefully before procuring U.S. chips and seek to expand

cooperation with chip firms from countries and regions other

than the United States, according to its official WeChat

account.

It also encouraged domestic firms to "proactively" use chips

produced by both domestic and foreign-owned enterprises in

China.

U.S. chip export controls have caused "substantial harm" to

the health and development of China's internet industry, it

added. Companies targeted by the United States said they would

be able to continue production due to their efforts to localise

output.

The China Association of Communication Enterprises said it

no longer saw U.S. chip products as reliable or safe and the

Chinese government should investigate how secure the supply

chain of the country's critical information infrastructure was.

The warnings echo China's treatment of U.S. memory chipmaker

Micron, which became the subject of a cybersecurity

review last year shortly after the U.S. imposed export controls

on chipmaking technology to China.

China later barred Micron from selling its chips to key

domestic industries, impacting a low-double-digit percentage of

its total revenue.

Intel ( INTC ) has also faced scrutiny. In October, another

influential industry group, the Cybersecurity Association of

China, called for a security review of Intel ( INTC ) products, saying

the U.S. chipmaker had "constantly harmed" the country's

national security and interests.