Biden’s ban on semiconductor exports to China, explained

A month ago, the US Department of Commerce released a remarkable set BAN on the export to China of semiconductor chips and other high-tech equipment.

The highly technical nature of export controls may overshadow how important this new policy is — perhaps the most important of this administration.

The new rules appear to mark a major shift in the Biden administration’s China strategy, and indicate a major threat to China’s high-tech industries, including military technology and artificial intelligence. Washington think tank CSIS NAMED The White House’s new approach to China’s tech sector is “strangling with intent to kill.” Chinese American tech entrepreneur tweeted that China’s chip businesses fear “destruction” and “head-closing of the industry.”

Dominance in advanced technology has long been a the middle part Beijing’s vision for the country’s future. China has been able to compete with industry leaders throughout the world RANGE of advanced technology, but global semiconductor production is still domination by several corporations, none of them Chinese. China depends on foreign chips; country spend more per year import chips than oil.

But the new export controls bans exports of advanced chips to China, as well as chip design software, chip manufacturing equipment, and US-made manufacturing equipment components. The ban would not only cover exports from American firms, but also apply to companies worldwide that use US semiconductor technology – which would cover all the world’s leading chipmakers. The new rules also prohibit US citizens, residents, and green card holders from working at Chinese chip companies.

In short, the Biden administration wants to prevent China from buying the world’s best chips and the machines to make them. These top chips will power not only the next generation of military and AI technology, but also the self-driving vehicles and surveillance technology that Beijing relies on to monitor its citizens.

What are the stakes of the Biden administration? How will China respond? Where does this geopolitical drama go next? To find out, I spoke with Jordan Schneider, senior analyst for China and technology at Rhodium Group, a research firm. A transcript of our conversation follows, edited for length and clarity.

Michael Bluhm

What does the Biden administration hope to do with these export controls?

Jordan Schneider

deep speech In September, National Security Adviser Jake Sullivan offered new justification for US thinking about export controls on emerging technologies in China. He states that certain technologies are “force multipliers“and it is critical to future economic and national security events that the US must do whatever it takes to increase the gap between American and Chinese capabilities.

Because of that, you are now seeing path-breaking and very aggressive technology controls in semiconductors. The goal is to maintain, for certain basic technologies, as large a lead as possible over the rest of the world before China.

Michael Bluhm

Observers in the US and China have said that this is a very important step by the Biden administration, both for technology and geopolitics. How big of a deal is this?

Jordan Schneider

That is a big problem for China’s semiconductor industry. That’s a big deal for the global semiconductor industry. When you consider its importance in all of US policy, it’s a relative thing, but it’s important because it’s an inflection point.

This is the first manifestation of this new doctrine expressed by Jake Sullivan, and it will probably play out in several different technologies. Alan Estevez, the undersecretary of commerce who heads the Commerce Department’s Bureau of Industry and Security, said in late October that the US will not necessarily stop at semiconductors. They will go down a list of potential, emerging technologies that will define the next few decades of the global economic and technological landscape, and then explain what the US can do to try to limit China’s domestic capabilities.

Export controls are an important fulcrum for several reasons. First, during the first two years of this Biden administration, it is not clear that they will land where they are: taking more aggressive steps to block the development of Chinese technology.

Second, it’s a milestone in a very long arc. In the early 1980s, the US tried to boost Chinese technology, to balance against the Soviet Union. We brought China into the World Trade Organization. And now, the conclusion by a centrist Democrat president – which will be magnified and magnified if a Republican takes office – is that China cannot be trusted with frontier technology.

It is because of China’s place in the world, and especially because of the centrality of civil-military fusion [Chinese President Xi Jinping’s] vision – the idea that China is hoping to use civilian companies to directly improve China’s military capabilities.

The restriction is a dramatic decision by the Biden administration, and if the US-China competition is not baked, this is really the point of no return for the relationship.

Michael Bluhm

This seems like a dramatic geopolitical moment. And this relationship, at least according to some analysts, could define global politics in the 21st century. How might export controls affect the dynamic between the US and China?

Jordan Schneider

It is important to recognize that this is a dynamic environment. The Chinese government will also speak. And the Chinese Communist Party The latest Party Congresswe have a dramatic manifestation of how much Xi has consolidated power and how his vision of China’s future will dominate the People’s Republic for years to come.

The Biden administration spent its first two years saying to China, “Let’s do something about climate change. Maybe we can collaborate on some public health issues.” From time to time, the Chinese government has not been interested in engaging in the positive number activities that the Biden administration thought it could pursue.

The Biden administration would love to strike a better balance between the competitive, collaborative, and adversarial parts of the US-China relationship, but that’s not where Xi wants to take it.

The administration has concluded that the kinds of collaborations favored by Xi — such as the transfer of foreign technology to China — do not play to U.S. advantage in the long term. There is a complete lack of confidence, in the Biden administration, where Xi wants to take China.

Michael Bluhm

You start your answer by pointing out that China also has institutions here – and by noting Xi’s political dominance. So how are Chinese leaders responding to export controls?

Jordan Schneider

We haven’t heard much in the past few weeks, for obvious reasons. The Party Congress is the biggest political event every five years, and it inevitably results in less bandwidth for senior leaders.

Given some The latest report from Bloomberg of conversations with officials from China’s Ministry of Industry and Information Technology and senior executives in China’s semiconductor industry, it seems they are still processing what this means for the future of their industry. They will soon find out, if they haven’t already, that this is a really terrible blow for the future of Chinese firms trying to develop frontier tech in the chip space.

They have several potential paths forward. It can duplicate outdated manufacturing technology, which means established technology that is still widely used in countless products. They may try to punish the US by retaliating against leading electronics firms. They can retaliate directly against the semiconductor supply chain by making moves rare earth minerals need to make chips, or in packaging – an area where China has a considerable place in the global market. They can do something as escalatory as a cyber-attack on some leading-edge American chipmaker.

Given how central this vision is to creating an independent technology ecosystem for China’s leaders, I don’t think they’ll look at these export controls and say, “Okay, maybe we should give up and focus elsewhere..” The long-term goal of creating advanced capacity in China is such a core part of Xi’s vision that I find it hard to imagine them not taking this as a challenge.

Michael Bluhm

Building a high-tech industry is a critical part of Xi’s strategy, as you say, but the US is also working to move some chip manufacturing onshore. The pandemic has made it clear to many on both sides that the US depends on fragile supply chains for many of its most critical technologies.

The CHIPS LAW passed in July with bipartisan support in the Senate, and it aims to support the research and production of semiconductor chips in America. But how realistic is it to build a large chip manufacturing industry in the United States?

Jordan Schneider

This is certainly realistic. For a long time, America made most of these chips. It is not realistic to do what China will do now: create advanced chips in China by localizing thousands of different steps in the supply chain.

The CHIPS Act and the broader push to bring semiconductor manufacturing back to the U.S. have several different goals. The Department of Commerce outlined its four goals strategy document: to invest in American production of strategically important chips, especially leading-edge chips; to make the global supply chain more sustainable, especially for national security purposes; to support American R & D; and make America’s semiconductor workforce more diverse and vibrant.

The goal can be achieved, although it is not clear whether the funds in the act will be sufficient. Given worries about potential disruption of chip manufacturing in TaiwanIt’s a bit of an insurance policy for the eventuality.

There is also a broad justification in industrial strategy, because this is and will continue to be one of the most important industries. Without this support, it’s probably a new semiconductor fabricated capacity will come online very much in the US, as it competes against Taiwan, Singapore, Japan, China, and South Korea, all of which subsidize domestic factories.

Michael Bluhm

Finally, how seriously do you think this can damage China’s high-tech industry?

Jordan Schneider

This is basically freezing at the level that these Chinese manufacturing firms have advanced today. There is a ton of manufacturing capacity in behind-the-scenes technology in China. They will be able to continue business as usual, making the hundreds of millions of chips that go into electronics sold around the world. But they will not be able to make the highest-end, the highest performance, the most power-efficient chip, which the US government has identified as important – especially for WMD, but also in the coming artificial intelligence revolution. This is the chip that is going to run the AI ​​model that is going to shape our lives militarily and economically.

The progress you expect Chinese companies to make is now closed to them. International technology and suppliers that they should have advanced to where Intel, TSMC, and Samsung are now, are now blocked to them, thanks to these new regulations.

Michael Bluhm is a senior editor at signal. He was previously managing editor at the Open Markets Institute and writer and editor of the Daily Star in Beirut.

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