Brazil Defies US, Cozies Up To Chinese Tech On Chip Building

Brazil took its first tentative steps towards a relationship with China's tech industry this week in defiance of US efforts to dissuade its erstwhile ally from siding with the Middle Kingdom.

In a meeting with Chinese Premier Xi Jinping this week, Brazilian President Luiz Inácio Lula da Silva agreed to form a working group to pursue semiconductor production in South America, Reuters reported Friday. And to reinforce this collaboration, the two leaders signed 15 agreements, which would promote joint research and development of technologies ranging from satellite rainforest monitoring to investments in 5G communications, internet, and security services.

The meeting underscores Brazil's interest in attracting Chinese tech investment, including semiconductor manufacturing and packaging, in the region. And as we've previously reported, as the largest and wealthiest nation in South America, Brazil is a particularly attractive foothold for broader tech investment on the continent.

However, Brazil's courting of Chinese chipmakers comes in opposition to the US-led coalition of countries — which includes Japan, the Netherlands, and Taiwan — actively working to suppress China's fledgling semiconductor industry. These steps have included cutting Chinese access to semiconductor equipment and material supply chains.

This isn't the first time that Brazilian leaders have pushed back against US interests.

The US has for years pressured allies and friendly nations, particularly in Europe, to rip and replace Huawei and ZTE gear from their networks citing national security concerns, including the potential for backdoors planted by the Chinese government. These efforts are ongoing with the UK government recently announcing a rip and replace order, and Germany currently weighing the economic consequences of following suit.

During Brazil's previous administration, the country weighed banning Chinese telecommunications equipment, but quickly backed down after carriers complained that such a ban would drive up prices.

• China the largest buyer of chipmaking machines as sales hit an all-time high
• Tencent said to have demoted and fired tech bosses after brief outages
• Sanctions-busting exporters sent $2 billion of tech to Russia through China, Hong Kong, and the UK in 2022
• US chip sanctions may push Brazil, others right into China's arms

But despite the warnings, Brazilian officials have brushed off any US pressure. In March, Foreign Minister Celso Amorim said that Brazil wasn't afraid of the "big bad wolf," and that if a Chinese chipmaker approached the country about building a fab there, he didn't see why they'd refuse.

And given the contents of the agreements signed this week, which place a heavy emphasis on networking and 5G communications, it seems unlikely the country will stop using Huawei equipment anytime soon.

It remains to be seen whether the China-Brazil semiconductor work group will amount to material investment in the region. Chip manufacturing is a notoriously costly endeavor that not only relies on materials, but power, water, and talent. ®