The US cites national security reasons for its export controls on advanced chips and equipment. But these moves could be self-destructive as China is the world’s largest semiconductor consumer, Chinese experts tell the programme Insight.
Ever since the United States announced export controls in October to cut off China’s access to advanced chips and semiconductor manufacturing equipment, Shenzhen businessman Tom Zhang has found it harder to source and distribute chips.
Stocks that his company, Smart Jade, were previously able to import from the US to sell to technology companies in China have become difficult to buy.
The way he sees it, the chips war is simply the US “looking for excuses” to suppress China. “The top dog doesn’t want to give up his seat to the number two,” said Zhang, Smart Jade’s chief executive officer.
The US is also getting its allies on board. In January, the Netherlands and Japan were reported to be joining in the restrictions on exports of semiconductor manufacturing equipment to China, but details are presently scant.
Meanwhile, China has launched a trade dispute in the World Trade Organisation over the US’ export controls.
Will the US choke off China’s rise in artificial intelligence (AI), supercomputing as well as its AI-related military advancements? Or will it supercharge Beijing’s bid to be a technological superpower?
The programme Insight examines a face-off that could have far-reaching implications for Asia, which manufactures the bulk of the world’s microchips.
WHY SEMICONDUCTORS MATTER
Chips are “absolutely necessary” for almost everything we use in our daily lives, such as smartphones and vacuum cleaners, said Ryu Yongwook, an assistant professor at the Lee Kuan Yew School of Public Policy, who specialises in international relations.
A chip, also called a microchip, is a set of electronic circuits on a small piece of silicon, according to Dutch firm ASML, which makes lithography or projection systems that are essential to chipmaking.
Transistors on a chip act as miniature electrical switches that can turn a current on or off, and a chip the size of a fingernail contains billions of transistors, ASML said on its website.
The US is not concerned about chips that go into appliances like rice cookers and calculators, said Ryu.
“But when it comes to the latest military equipment, the latest radar systems … artificial intelligence (and) quantum computing — stuff that’s necessary for the most advanced digital economy — the USA wants to curtail China’s development.”
The US’ rationale for its exports controls is national security.
To justify its October regulations, it analysed the “connection” between exports of advanced chips and semiconductor technologies and the “military supercomputers that China uses to develop nuclear weapons and advanced nuclear missile delivery systems”, stated a report this month by the Centre for Strategic and International Studies, a policy research organisation in Washington.
The US Commerce Department and President Joe Biden’s national security adviser have indicated that China’s military-civil fusion is “speeding up”, economic and data policy analyst Jordan Shapiro with the Progressive Policy Institute in Washington told Insight.
Military-civil fusion refers to the two-way transfer of technology, resources and information between military and civilian entities.
“There’s more integration between the civilian and the military technology development, which is creating a little bit of a security and economic challenge for America,” she said.
Ryu reckoned that Chinese President Xi Jinping’s Made in China 2025 plan, announced in 2015, to achieve 70 per cent self-sufficiency in semiconductor production by 2025 “alarmed” the US government.
“The concern was not only China’s tech rise, but the pace at which China’s tech rise was taking place. And at the same time, the US-China strategic rivalry was intensifying,” he noted.
WHAT THE EXPORT CONTROLS ARE ABOUT
The US’ countermeasures have been broad. US companies are barred from supplying advanced chips and chipmaking equipment to China unless they receive a special licence. But licences would be mostly denied, the US authorities said.
Companies anywhere in the world will also be barred from selling chips used in AI and supercomputing in China if they are made with US technology and software, the New York Times reported.
US citizens and “resident aliens”, including green card holders, may not work on or support the production of advanced semiconductors for China.
Singaporean Prime Minister Lee Hsien Loong said in October that the Biden administration’s move is “a very serious one” and could have “very wide ramifications”.
Ryu said: “The USA has identified a critical area that could hurt China badly. And the USA also knows that China doesn’t have many other options to respond to this.”
Currently, China consumes more than 50 per cent of global chips as the manufacturing hub of the world. But it manufactures only around 15 per cent of global output, he cited.
China lacks the capacity to manufacture advanced chips at 7 nanometres and below — a nanometre is one thousand millionth of a metre — and its reliance on imports from places like Taiwan and South Korea is “100 per cent”, added Ryu.
And although Asia — namely Taiwan, Japan, South Korea and China — manufactures over 70 per cent of the world’s chips, US companies are market leaders in activities that are most research-intensive, according to the US’ Semiconductor Industry Association.
These activities are electronic design automation and core intellectual property (72 per cent), chip design (49 per cent), and manufacturing equipment (42 per cent), according to the association’s 2022 State of the US Semiconductor Industry report.
Last August, the US also enacted the Chips and Science Act, allocating US$52.7 billion (S$70 billion) over five years for semiconductor research, development, manufacturing and workforce development in the country.