A trade showdown is looming between the U.S. and Chinese governments, and the flashpoint is semiconductors. American chipmakers are deeply unsettled by a recent Chinese mandate that they must link up with Chinese companies by June 1 if they want to sell Wi-Fi, or wireless local area networking, chips into the local market. The kicker: China wants the U.S. firms to share technological know-how with the local outfits, in a country renowned for theft of intellectual property. If that weren't enough to raise hackles on both sides of the Pacific, late last week the U.S. government filed a World Trade Organization complaint on a separate front, objecting to the heavy tax imposed on semiconductors imported into China. That the chip trade disputes have become so heated and public shows that China will be anything but a passive customer for advanced American technology. Indeed, the wrangling speaks to Beijing's own ambitions to push the Chinese economy further along into high-tech areas like semiconductors. Though the WTO complaint garnered more press, chip leaders say they're more worried by the Beijing mandate on Wi-Fi chips, which requires them to join forces with one of two dozen Chinese companies versed in a domestic Wi-Fi security standard known as WAPI, or wired authentication and privacy infrastructure. To get access to the WAPI protocol, U.S. chipmakers say they are being asked to divulge details of their own technology to Chinese counterparts. "The way in which the Wi-Fi encryption technology has surfaced has been more disconcerting than the tax dispute and portends a future standards issue," said Debbie Leilani Shon, a former assistant U.S. trade representative in the Clinton administration who currently teaches international trade policy at the University of Southern California. "This is a technical barrier to trade, and the way it has evolved is very blatant." The situation has aroused consternation among U.S. chipmakers angling for a share of the fast-expanding China semiconductor market. China is expected to become the second-biggest chip market in the world by 2010, according to IDC, up from its current third-place ranking. Last year, Intel ( INTC) claimed $3.7 billion worth of sales into the market, amounting to a sizable 12% of its total revenue and making it the lead chip supplier into China.