Four major Chinese industry associations have issued a stark warning to domestic companies, advising them to limit their reliance on U.S. semiconductor products and prioritize local alternatives.

The coordinated announcement comes amid intensifying economic friction between China and the United States, compounded by Washington’s latest export restrictions targeting Chinese semiconductor firms.

The associations, representing sectors including telecommunications, semiconductors, the digital economy, and the automotive industry, collectively advocate for reduced procurement of U.S. chips, which they described as “no longer safe or reliable.” While the warnings stopped short of specifying reasons for the safety concerns, they align with Beijing’s broader push for technological self-reliance and retaliatory measures against U.S. trade policies.

This move could potentially impact major U.S. chipmakers such as Nvidia, AMD, and Intel, which have historically relied on the Chinese market for substantial revenue. The Semiconductor Industry Association, a U.S. trade body, countered the claims, calling them “inaccurate” and cautioning that such calls undermine global semiconductor trade.

“Export controls should be narrow and targeted to meet specific national security objectives. We encourage both governments to avoid further escalation,” the U.S. group said.

Escalating Trade and Technology Rivalry

The announcement follows Washington’s decision to impose fresh export controls on 140 Chinese entities, including Naura Technology Group, a significant player in the chipmaking equipment industry. This marks the third major crackdown in as many years, further straining relations between the two global powers.

In a tit-for-tat response, Beijing has banned exports of critical rare minerals essential for military applications, solar cell production, and advanced manufacturing. These minerals are vital to numerous industries, including those in the United States, signaling China’s readiness to weaponize its control over key supply chains.

“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,” said Tom Nunlist, associate director at policy research consultancy Trivium China.

The warnings from the Chinese associations could influence corporate strategies but may not result in immediate action. Nunlist noted that market dynamics would ultimately dictate companies’ procurement decisions. However, the push for self-reliance and alternative partnerships is clear.

The Internet Society of China, one of the associations issuing the warning, urged companies to strengthen ties with non-U.S. chipmakers and emphasized the importance of domestic and foreign-owned enterprises operating within China. It also accused U.S. export controls of causing “substantial harm” to the country’s internet industry.

Meanwhile, the China Association of Communication Enterprises has called for a thorough review of the U.S. chip supply chain, citing security concerns and a lack of reliability.

This isn’t the first time U.S. companies have faced scrutiny in China. In 2023, U.S. memory chipmaker Micron was barred from selling to key industries following a cybersecurity review. Intel, another U.S. tech giant, has similarly been under the spotlight, with the Cybersecurity Association of China accusing it of jeopardizing national security.

These measures underscore China’s growing use of regulatory reviews as a countermeasure to U.S. export controls, reflecting a deeper shift in the global semiconductor trade market.

While the warnings may not lead to an immediate cessation of U.S. chip purchases, they signal a significant shift in China’s strategy to insulate its industries from external pressures. Beijing aims to mitigate the long-term impact of Washington’s policies by fostering local innovation and seeking partnerships outside the United States.

For U.S. chipmakers, the escalating trade and technology rivalry poses risks to their revenue and market share in China, a critical hub for semiconductor demand. As both nations continue to leverage economic measures, analysts predict that the global semiconductor supply chain may face further fragmentation, raising costs and complicating international collaboration.

With President-elect Donald Trump set to return to the White House in January, and his previous promise of imposing heavy tariffs on Chinese goods, tensions are expected to escalate, creating an even more uncertain environment for global trade.