The race for supremacy in 21st-century technology has become a focal point of animosity between the world’s leading powers. As Janet Yellen, the US Treasury Secretary visited Beijing in July to stabilize economic ties, a central concern on the agenda is how to navigate the intensifying chip war between China and the United States. Despite diplomatic efforts from both sides, the competition for advanced technology between these great power competitors shows no signs of abating. In a hostile move preceding Yellen’s trip, Beijing imposed export restrictions on two minerals crucial to the production of semiconductors and other advanced technology. Reuters emphasized in a June 16 report that China should not deplete its mineral resources only to be obstructed from pursuing technological development. Simultaneously, the Biden administration is reportedly preparing to expand its restrictions on the sale of advanced microchips to China.
Washington’s concerns revolve around two key issues. Firstly, there is apprehension that China’s People’s Liberation Army (PLA) could surpass the overall power of the US military. Secondly, there is a fear that China might employ US technology to achieve this objective. President Xi Jinping has mandated the PLA to become a “world-class” military force by 2049, coinciding with the centenary of the Chinese Communist Party’s rule. This vision entails developing autonomous weaponry, including hypersonic missiles, and utilizing artificial intelligence (AI) for diverse applications, such as electronic warfare. The extent of China’s progress towards this goal remains uncertain.
The US Department of Defense’s annual report on China’s military power highlights that the PLA is actively pursuing next-generation combat capabilities, heavily reliant on the expanded use of AI and other advanced technologies across all levels of warfare. However, while China leads the world in certain AI applications like facial recognition, its domestic industry has yet to achieve the production of cutting-edge semiconductors that power these technologies. As a result, Chinese businesses, including the military, depend on imports to acquire advanced chips.
While China leads the world in certain AI applications, its domestic industry has yet to achieve the production of cutting-edge semiconductors.
In October 2022, the Biden administration implemented a comprehensive set of export controls targeting China’s access to US-origin semiconductors and related products. Consequently, individuals and businesses in China can no longer purchase advanced chips and chipmaking technology from US suppliers without specific licenses obtained from the US government. These controls were reinforced in January when the Netherlands and Japan were convinced to limit the export of technology used in chip production. Both countries were targeted because they possess the world’s most advanced chip manufacturing technologies, including the Dutch company ASML. ASML is the sole provider of the latest generation of photolithography scanner equipment, essential for etching intricate circuits onto silicon wafers. The Netherlands confirmed on June 30 that its export controls would take effect from September 1.
Jake Sullivan, Biden’s National Security Advisor, claims that the restrictions are designed to safeguard foundational technologies with a “small yard and high fence.” On the other hand, President Xi and other senior CCP officials accuse the US of engaging in containment akin to the Cold War era. Jensen Huang, the CEO of Nvidia, one of the leading chip companies globally, warns that the restrictions pose a significant risk of “enormous damage” to the tech industry. Nvidia experienced nearly a 20 % year-on-year decline in revenues from China and Hong Kong in the 12 months leading up to February. In recent months, Nvidia has resorted to offering less advanced chips, such as the A800, to Chinese buyers. However, the new restrictions under consideration by Washington would even curtail the availability of such products. Chinese companies have also felt the squeeze. Data from China’s General Administration of Customs reveals that chip imports were down by almost 30% in the first five months of this year compared to the same period in 2022.
China’s response has been nothing short of anger and frustration. In May 2023, Wang Wentao, China’s commerce minister, urged Japan to abandon its export controls, underscoring China’s strong opposition to such measures. Beijing retaliated by banning the use of chips made by US company Micron in critical infrastructure projects, viewed as a direct response to US restrictions. Nonetheless, Chinese businesses remain eager to obtain top-of-the-line chips and are employing creative techniques to circumvent export controls. Some companies are resorting to renting chips or procuring them through intermediaries. Moreover, a black market for smuggled semiconductors has emerged.
The US government aims to close these loopholes and broaden the scope of restrictions. Alongside restricting the sale of Nvidia’s A800 chips, the Biden administration is reportedly considering limitations on leasing cloud services, which some firms have utilized to evade the rules. The Dutch government is also expected to expand the scope of its export controls. While Beijing and Washington claim to be working towards a diplomatic resolution, their widening divergence on the issue of critical 21st-century technology remains evident.
The writer is a freelance journalist, and can be reached at shabbirahmadvet@yahoo.com