Sometimes, you have to give it to them. The Biden administration placed trade restrictions last week to stop China from sharing next-generation microchip technology. On October 7, , the Department of Commerce announced new export restrictions and potential sanctions against China’s advanced semiconductor sector. These restrictions have had dramatic and immediate consequences on the global semiconductor industry.
It is notable that the U.S. ban on U.S. citizens aiding Chinese chip manufacturer manufacturers is especially significant. This has meant that many Americans and Green Card holders have had their jobs resigned or been forbidden from working with Chinese clients. Although there are some disagreements about the amount, it is widely believed that this move will seriously hinder development of Chinese high-tech, particularly artificial intelligence research and applications.
If Commerce’s restrictions successfully hamper Chinese microchip production over the long term, and encourage an industry focus on U.S. manufacturing and markets, they will demonstrate the kind of steering-into-the-skid policy approach likely to define the next decade. The United States is now in an awkward position where it remains the dominant hegemon in a globalized, but deglobalizing world. While many of the tools of America’s liberal international order built after World War II remain available to us, the sustainability of free movement of people and money managed by global governance institutions is clearly in doubt. Over the past few years, supply chains have been proven to be fragile. Populist political movements are calling for greater security and self-sufficiency around the globe.
Although it is unlikely and even unfeasible to have full-blown autarky in Fortress America, it seems that we will be living in a time when multipolarity and regional turning inward here as well as abroad. This kind of internationalist protectionionism can be part and parcel of globalism’s demise.
Taiwan is the backdrop of all this. The American foreign policy experts with both a military- and an economic focus are still divided on what the United States should do in order to stop the Chinese Communist Party from invading the island. They can all agree to be critical of the U.S. dependence on Taiwanese semiconductor production, which is a significant part of what makes the island’s independence a strategic priority for many. Although there may be naval geography reasons to defend Taiwan, most China hawks see this as a game of poker. This is where the chips are.
Biden’s restrictions have raised the stakes. The U.S. policymakers made it clear that they will not allow China to reach technological supremacy and self-sufficiency by cutting off access to the international semiconductor market. They also made Taiwan’s high tech industrial base more attractive.
China rose to international prominence not only by copying Western technology but also by undercutting Western labor. China’s semiconductor industry is not different from other countries in this respect. Because China is still heavily dependent on American scientific research and knowledge, these new restrictions are effective. According to Bloomberg , “Foreign-born engineers and designers, along with Chinese citizens with foreign passports or residence, have long played a key role in the nation’s technological development.” According to Star Markets filings in early 2022, six of seven top research and development executives at China’s largest semiconductor equipment manufacturer Piotech Inc. are American citizens. Piotech’s chairman and general manger are all Americans.
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Wired reports that SMIC, China’s leading chipmaker, is several generations behind U.S., Korean and Taiwanese companies. SMIC produces at 14 nanometers, compared to the advanced 5- and even 3-nanometer chips. The Dutch manufacturer of the machines required for the new generation is now prohibited from exporting to China. Xi Jinping speaks big about China’s ability to produce a large number of technological leaders. Now, he will have to test if they can do it.
As with Russian economic resilience under sanctions it is possible to achieve success sooner than expected. This could lead to Xi being forced to take the necessary steps. Russia’s economy is built upon its vast natural resources. China wants to become a twenty-first-century economy. If it has been dependent upon foreign researchers being bought and stolen to make its technological and scientific strides, then Taiwan is the next destination. In the middle of the Communist Party’s National Congress, it is clear that there are Chinese planners looking at the island 100 miles off with more intent. China is no longer able make the things it needs, and it is no longer able buy the goods it needs. In remarks made at Stanford University on Monday, Secretary Of State Antony Blinken stated that Beijing was “determined to pursue unification in a much quicker timeline”.
We will soon find out if CCP was lying. The U.S. has been a strong player. It is clear that American policymakers are focused on Europe right now, and there has been no evidence to suggest they can play two high-stakes, simultaneous games.