Chip, all the effects of the new US blockade on China
The United States has announced a new plan to restrict sales of advanced chips to China. Here are facts, context, predictions and comments
On Friday, the United States announced a new package of restrictions on the sale of semiconductor technologies in China. Washington's goal is to prevent Beijing – its great geopolitical rival – from accessing various capacities, machinery and components for the production of microchips, consequently holding back its economic development and military innovation.
THE CONTRAST OF THE CHINESE MILITARY APPARATUS
The restriction package was issued by the Commerce Department. Undersecretary for Industry and Security Alan Estevez explained that his department is working to prevent the Chinese military from acquiring technologies that can be used for military purposes.
Supercomputers, for example, make it possible to test nuclear weapons, maneuver hypersonic missiles, and operate mass surveillance systems. To work, however, these computers need advanced semiconductors: the same ones that Joe Biden's administration wants to prevent from falling into Beijing's hands.
REPLYING THE "WAR" IN HUAWEI
The New York Times wrote that the new Commerce Department rules represent the largest export control plan issued by the United States in the past decade. In essence, there are no major differences with the limitations set by the previous Donald Trump administration against the tech company Huawei . But the latest restrictions are much broader in scope, affecting dozens of Chinese companies. And they also appear to be underpinned by a structured policy of disrupting supplies of advanced technologies to China, aimed at crushing its (nascent) manufacturing capabilities for complex chips.
– Read also: Here is Biden's plan to curb chip sales to China
In fact, companies will no longer be able to sell advanced computing microchips, chip-making machinery and other similar American products in China, unless they obtain – but it seems unlikely – special licenses.
WHAT IS CHINA LIKE?
The Chinese government has invested heavily in developing the domestic semiconductor industry, but lags behind the United States, Taiwan and South Korea in advanced chip manufacturing. It's a problem for Beijing's digital plans , because the domestic artificial intelligence industry, for example – a field the country is well positioned in – needs high-tech microchips that Chinese manufacturers can't supply it.
The sector, as a result, is mostly dependent on the purchases of components from abroad, but now it could have difficulty obtaining them: the United States has in fact imposed severe limits on the export of graphic processing units to China (circuits necessary for artificial intelligence). , in fact), of semiconductors for supercomputers and machinery for the production of logic and memory chips.
Read also: Here is the US state aid for the production of microchips
The restrictions do not just affect US-based companies, but all those – regardless of location in the world: a concept known as the foreign direct product rule – that sell AI and supercomputing chips containing American technologies or made with American software and tools.
CHINESE COMPANIES AFFECTED
Among the Chinese companies that will be most affected by the American restrictions are – according to the New York Times – those that deal with artificial intelligence and therefore depend on graphics processing units, such as SenseTime and ByteDance (the company that owns TikTok). But also microchip manufacturing companies that need foreign machinery, such as SMIC, Yangtze Memory and ChangXin Memory.
BACKGROUND FOR THE UNITED STATES?
On the other hand, the plan of the Biden administration could also damage the American companies themselves, which have a fundamental market in China. They claim – these companies – that sales in the People's Republic guarantee them the necessary income to finance investments in research and development; lacking enough capital to reinvest in innovation, they may then fail to remain competitive and ahead of foreign competition.
National Security Advisor Jake Sullivan recently stated that the US goal is precisely to "maintain the widest possible advantage" over critical technologies "such as advanced logic and memory chips."
ARESU'S ANALYSIS
Alessandro Aresu, geopolitical analyst and author of The powers of political capitalism. The United States and China , he explained on Twitter that “one of the most important players to read the US / China competition today is the Bureau of Industry and Security [BIS, ed ] of the Department of Commerce. The Department of Commerce plays a leading role in export control and trade sanctions. This role has a long history, not only in the international system but also in the provisions of US economic warfare (Defense Production Act of 1950) ”.
“In US politics,” continues Aresu, “in addition to participation in multilateral agreements on export control (including the crucial Wassenaar Agreement), there are internal provisions on the 'interests of national security and foreign policy'. The expression 'national security and foreign policy interests' expands with the intensity of technological development and competition with Beijing, leading to a thorough use of the BIS 'lists' and 'authorizations'. But what are these lists? ".
"In summary", he explains, "the inclusion of a company in the lists blocks normal trade flows: US companies must have government authorization for transactions, and in many cases (important point) this also applies to other companies that they use USA technology and components. The most relevant case (2019/2020) is Huawei: its inclusion in the list affects the company's trajectory but also prevents (on a technical, not only political level) its chip transactions with TSMC of Taiwan, for several billion ".
"The history of the last decade", therefore, "can be read through decisions of the BIS (and the CFIUS) that respond to commercial and technological practices of Beijing (huge subsidies, close military-civil relations), and then CHIPS Act and Inflation Reduction Act as a US counterattack. Of particular interest for the US is the Chinese trajectory on semiconductors, the largest voice of Beijing's imports, an area on which China has been wanting to climb technological positions for decades, within the most complex and advanced industry on the planet ”.
According to Aresu, “the most recent action shows US attention to Chinese developments in artificial intelligence which, like everything in our digital life, is based on chips. So China's current and prospective computing and surveillance capability requires some components. This summer there are restrictions on the most valuable elements, produced by AMD and Nvidia, but the most recent decisions of the BIS are much heavier and more varied, both at the sectoral level (supercomputer and end use, manufacturing) and for the functioning of the lists. On the one hand, new companies are added to the lists. The most famous is Wuhan's YTMC, which has climbed positions in the memoirs and which has sparked national security concerns for its collaboration with Apple. Then there are also some companies and research activities in chemistry: an aspect that is always very important to consider because the role of chemistry in semiconductors and batteries is perhaps the most underestimated thing in these supply chains. Furthermore, the latest provision links the inclusion of Chinese companies in the lists to the 'lack of cooperation': the BIS asks the Chinese to see who are the customers and the strategies of the companies, to verify the military-civil merger and to know the supply chain ".
"These measures are interesting", concludes the expert, "not only because of the escalation of the economic and technological war but because they have effects on all other countries (given that supply chains adapt, with resistance and collaborations) and on the same Chinese trajectory. China, in fact, as it has always done, will in any case seek, albeit with frustration, new creative trajectories to pursue its objectives, trying to overcome the (enormous) obstacles of export controls and lists. The game never ends. This has indirect effects: maybe the Chinese go to other specialization segments, they do research on something previously underestimated. With effects on other competitors as well. Or, when cornered, they will even decide to 'cooperate' on something ”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/stati-uniti-restrizioni-chip-china/ on Mon, 10 Oct 2022 09:45:47 +0000.